Start-up companies use seed financings primarily to
raise the capital required to build a minimum viable product and
test their product-market fit. This article provides guidance to
company counsel and founders on how to identify a seed investor and
choose the financing method that best fits the company's needs.
The article assumes that the company is a Delaware C corporation,
which is the market standard for venture-backed
companies.
Understanding the Goals of Various Types of Investors
A typical seed financing features a founding team (and perhaps
up to a handful of employees) raising between $500,000 and $2
million to allow for 12 to 24 months of operational capital. During
this time, the founders will attempt to prove out their idea and
develop the traction required for raising the next round of
financing (known as a Series A financing) from a professional
venture capitalist.
