Seed funding

Indian Economy glossary

Also called: Seed capital · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT

Meaning

Seed funding is the first money a startup gets from outside its founders. It is used to test the idea, build a prototype (a first working model) and check whether customers want the product. The amounts are small, but so are the chances of success, so seed money is high risk. Without it, many good ideas never reach the market.

Example

Under the Startup India Seed Fund Scheme (2021), incubators give early funds to eligible startups. These funds pay for proof of concept, a prototype and market entry.

Don't confuse with

  • Bootstrapping: bootstrapping uses only the founders' savings and the firm's own revenue. Seed funding brings in outside money for the first time.
  • Venture capital (VC): VC money comes later, in larger amounts, once the product shows promise.

Related concepts

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