Seed stage venture capitalists

The investment decisions made by venture capitalists depend on their preference for industry sectors, geographic locations, or various stages of a company’s business life cycle. In the life cycle of a company, Venture capitalists finance different stages of the development of a company, such as the seed stage, the start-up stage and the expansion/growth stage. In general terms the seed stage is the stage at which equity is supplied in order to support the financing of research and development activities and the development of the initial concepts of the business. The seed stage holds a prominent place since this is the stage of the growth of a concept.

The seed stage is characterised by the initial capital that is used to do product and/or service development, patent filings, market surveys and research and business partner recruitment. The emphasis is on examining business idea feasibility and getting the firm ready to commence operations. In this stage, the founding entrepreneurs develop the business model, company goals and long-term product strategy. But access to capital is a critical foundation for the creation of new entrepreneurial companies. The venture capitalists invest in this stage when there is no real existence of a company or a real product.

Seed stage venture capitalists opt for formal financing where products have been prototyped and demonstrated, but are not necessarily manufactured in volume, and certainly, these companies are not generating revenue. Like other stages of investment, venture capitalists that invest at the seed stage do not act as passive investors but take an active and vested interest in guiding, leading and growing the companies they have invested in. They seek to add value through their experience in investing in a number of companies.

The venture capitalists that finance this stage of growth of a company believe in the philosophy that new ideas and innovative products backed by a sound business plan and a proper strategy could bring in rich rewards.



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