Seed capital is the funding required to get a new business started. This initial funding, which usually comes from the business owner(s) and perhaps friends and family, supports preliminary activities such as market research, product research and development (R&D) and business plan development.
Seed capital funding is considered high-risk because the business is not fully functional and has no track record. Investors who provide seed capital funding often do so for a stake in the company. Once a startup has demonstrated feasibility, it is more likely to attract venture capital or angel investment to provide the greater funds necessary to get the business up and running.