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The Beginner’s Guide to Seed Funding

You can’t expect to get your new company off the ground without adequate capital. Whether you’re launching a business-to-consumer (B2C) or business-to-business (B2B) company, you’ll need money to create a profitable company. While there are dozens of ways to secure capital for a new company, many entrepreneurs prefer seed funding.

The Beginner’s Guide to Seed Funding

What Is Seed Funding?

Also known as seed financing, seed funding involves selling some of a startup company’s equity to an investor or investment firm. It’s a form of equity financing, and like all equity financing, it requires you to forfeit partial ownership of your company.

How Seed Funding Works

With seed funding, you sell some of your startup company’s equity to an investor or investment firm. Seed investors recognize the value of startup companies with high growth potential. If an investor things your company will grow and become profitable, it will likely offer to purchase some of its equity. Equity, of course, is ownership, meaning the investor will become a partial owner of your company once he or she invests in it.

Advantages of Seed Funding

Seed funding offers several advantages. Unlike debt financing, you aren’t required to repay the money acquired through seed funding. You’ll be able to use the money to purchase new products or services that are essential in your company’s future success.

Seed funding can also bring new talent to your company. Seed investors want your company to succeed. After all, they’ll make money if your company grows and becomes profitable. As a result, many seed investors work closely with the companies in which they invest. They may offer expert advice that helps your company break into new markets.

Furthermore, seed funding is a faster way to raise capital for your company than traditional methods like a bank loan. After analyzing your company’s growth potential, an investor may make an offer for some of your company’s equity on the spot.

Disadvantages of Seed Funding

On the other hand, there are a few potential disadvantages to using seed funding. The biggest disadvantage is the fact that it requires you to forfeit partial ownership of your company.  Some entrepreneurs want to retain complete ownership, so they naturally disregard seed funding as a way to finance their company.

This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • October 10, 2019


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