Seed 단기알바 financing, also known as seed funding or seed money, is when investors trade an equity stake in the company, or a stake in a convertible note, for equity investment in the start-up. A seed round refers to a set of investments where a variety of investors, usually fewer than 15, take part in the fundraise, providing seed capital for the new business. Often, investors desire equity ownership in return for equity invested in the company, known as preferred stock.
When financing through stock, you set the valuation of your company, which has a price per share, and then you issue new shares and sell to investors. Here, your startup borrows from investors, intending to convert debt into equity in the future. Financing through convertible debt may work well for your startup if you think that equity is going to be worth more down the road.
Both a SAFE and convertible note are ways of raising capital without having to attach specific values to your company and define what share of the equity investors get. Say you raised $500,000 via SAFEs or a convertible note, and you are able to command only $3 million in valuation post-money, then the holders of your notes would have over 20% ownership in your start-up, discounting.
If a companys going to go on to raise more funding rounds, so new investors and future employees wind up owning another 50 percent, then a seed investor has mathematically invested in a $20 million post-money valuation. Lets assume that a seed investor puts $1M into a companys first funding round, with a $10M post-money valuation. This effect is even greater if a seed investor puts money in more future funding rounds, even if it only keeps doing its proportionate share of rounds.
Most investors would not invest in a future round if they saw that a company would fail to make it through a funding round at the seed stage. It is also very likely investors in this stage are not making investments to receive equity ownership of the company. Typically, when early-stage investors invest money into a company, they are looking to attract additional investors in order to generate additional hype and to confirm their investments.
That is why, in the past, investing in startups was restricted only to accredited investors, those with substantial earnings and a high net worth. Startup investing is not for everyone, especially investors looking for lower risk and a safe return.
If you only have a small amount of cash to invest, there is really no point in going through the hassles of incorporating. You are not only investing, but also running the business — and maybe you will not have as much time to invest either. It might seem crazy, but you are going to be spending a ridiculous amount of time doing things unrelated to investing, like talking with lawyers and accountants, reviewing legal documents, and answering questions from potential investors.
Your financial planner is not going to be the one who brings up investing in newly emerging, highly speculative private companies, so you are going to need to initiate that conversation. Before starting the financing effort, be sure you understand the valuation of your company, as well as the types of investors that will likely come in for startup financing. Keep in mind, however, that it is also quite possible for a single company to not be successful and to fail prior to any such liquidation event, so building up your startup investing portfolio is crucial.
It is also going to be extremely difficult to reinvest, scale, and bring on new investors with $5M. It also takes a lot more meetings and one-on-one investors to get to the critical mass of money if you are doing this process this way, so there is a distinct trade-off.
You can choose to put the money into a private account, or take the family office approach, rather than making this an actual hedge fund with external investors. Now, with services such as M1 Finance that let you invest without paying, there is no reason to combine your funds. You earn back on your investments as soon as the start-up is acquired by another company, or eventually goes public.
Your early investors receive equity at the point in time when the company has minimal value, so every dollar invested buys proportionally more stock. Aside from tainted incentives that may result from an overcapitalized company, every time a company raises capital, any previous investors are all dediluted, increasing the actual after-money value of all those initial dollars.
This is true even if using an investment instrument such as a convertible note or a SAFE (which stands for Simple Agreement For Future Equity), which delay deciding what share investors get until later.
For Sequoia Capital, though, it is one of the biggest investments that the fund has made in a single company. Cerent, the telecom, has also seen investments from various other investors, many of which (like Sequoia Capital) do not generally invest in biotech – among them, Elon Musk and Sequoia Capital. That is exactly how telecommunications company Cerent helped the Founders Fund turn their first investment into biotech into their biggest exit yet.
It was also a huge victory for Sequoia Capital, the firms sole VC investor, turning a $60 million investment into $3B in Sequoia capital. Nine months later, VC firm Benchmark Capital Partners invested $13.5M into the companys Series A, becoming the only investor in that round.
In a blog post, Sequoia Capital explained the opportunity fund will enable it to invest more heavily in its current portfolio companies at later rounds, as well as investing in the later rounds of companies that it will monitor but was not able to invest in earlier.