How Seed Investing Works

Funding Amounts and Valuation: Seed rounds typically involve funding amounts that range from $500,000 to $2 million, though this can vary based on the industry and geographic location. The valuation of a startup at this stage is often speculative and not based on substantial revenue figures but rather on the potential for future growth and earnings.

Equity Exchange: In exchange for capital, investors receive equity in the startup, which means a percentage ownership. For instance, a $6 million seed round might involve giving up about 10% to 20% of the company's equity, depending on the post-money valuation (the company’s value after the investment has been made).

Types of Investors: Seed investors can include angel investors (affluent individuals who invest their own money), venture capital firms that specialize in early-stage investing, and sometimes friends and family. Each type of investor brings not only capital but also different resources, such as mentorship or industry connections.