Ask HN: What do start-ups need seed money for?

1 point·rickymm3··4 comments

Is it server costs? Is it to rent a space somewhere and start building the business? Hiring/Contracting?? what is the primary reason a start-up would need capital?

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Well, first getting seed money is a small validation of your start-up idea and team that helps raising more capital in the future.

The idea of seed funding is to help you create a prototype that you can show to customers and determine what is the right product market fit for your company. Typically, this process will last six months or so (however, every company is different. Getting seed funding helps you quit your job, focus on building the company and set things up the right way, right from the start.

You can get seed funding from angels, super angels, friends and family, crowd funding, universities or seed stage VCs.

I would say most of them need money so they can quit their day job(s) and focus on building the product.

Thanks for the reply. So, to clarify, raised capital goes into the pockets of the founders? There is not typically a contract involved that requires company registration (i.e. incorporated), or suggestion on where to put the money?

Thanks again!

I have not raised money myself, but everyone I know who raised a seed round, incorporating was one of the stipulations. There is always a contract (term sheet), which spells out certain requirements. But typically the bulk of the money raised, goes toward supporting the founders as they build/launch the product.

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