People start new companies to pursue passions that implement their personal brand upon ideas. A concept doesn’t have to become a global phenomenon to achieve considerable success. But many businesses do have potential wide appeal. Even a company that’s not destined to become a household name might have a product that sells to a broad market. Extending the reach of these new businesses is the function of seed capital.
Companies that sell products online are typical of operations that benefit from seed funding. That round of money helps a startup find more customers in new areas, add additional features to its product, and create similar products for differential purposes and prices.
Sometimes a new corporation with a successful concept is a home-based business that has expansion possibilities. Another enterprise is a success in one location and embodies an opportunity to duplicate the idea in other areas. These are all instances where seed funding can turn the new business into a larger venture.
According to a survey by the Silicon Valley law firm Fenwick & West, entrepreneurs looking to expand have reason for optimism. The 2011 Internet/Digital Media and Software Industries Seed Funding Survey states that seed money deals increased last year.
The report tracks only the seed funding of technology startups on the west coast. But the data indicate the availability of seed capital and eagerness of investors to find attractive new companies to finance. Proving that seed money is used by enterprises of various sizes, only 45 percent of the companies with 2010 seed funding moved on to attract venture capital. So, a company doesn’t have to capitalize for capturing the entire nation’s attention with a new technology in order to use seed financing.
The median funding amount in the 2011 survey was $1,000,000 for arrangements using convertible notes. The average company valuation was $7,500,000 – up from $4,000,000 in 2010.