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Funding & Investmentessential

Seed Funding

Early-stage funding to develop product, hire initial team, and achieve product-market fit.

Example

A startup raises $2M seed to go from MVP to $1M ARR and prove product-market fit.

Good Range

$1-3M for 15-25% equity at $4-12M post-money valuation

Warning Range

Raising too little creates pressure; too much causes dilution

Complete Definition

Seed funding is typically the first significant institutional investment in a startup. It's used to turn an MVP into a more complete product, build an initial team, and work toward product-market fit.

Seed Round Characteristics

Amount

$500,000 - $3,000,000 typically $2-5M common in competitive markets

Sources

- Seed funds - Angel syndicates - Micro VCs - Accelerators - Some traditional VCs

Use of Funds

- Product development - Initial team building (5-15 people) - Customer acquisition experiments - Market validation - Finding product-market fit

What Investors Expect

- Working product (MVP+) - Initial traction or strong signals - Clear target customer - Compelling team - Large market opportunity - Reasonable valuation

Seed Metrics Benchmarks

- Revenue: $0 - $100K ARR common - Team: 2-10 people - Runway: 18-24 months post-raise - Dilution: 15-25% typical

After Seed

The goal is usually to achieve metrics that justify Series A: - $1M+ ARR (for SaaS) - Strong retention - Repeatable customer acquisition - Product-market fit signals

Used in:Funding RequirementsFinancial Projections

Related Terms

Pre-Seed Funding
The earliest stage of startup funding, typically from founders, friends, family, or angels.
Series A Funding
The first major institutional VC round, typically raised after achieving product-market fit.
Startup Valuation
The estimated worth of a startup, used to determine equity exchange in funding rounds.
Runway
The amount of time a company can operate before running out of cash.

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