seed roundImage Credit: Unsplash

The first thing that we need to understand is that a seed round of funding is a type of early-stage funding round for any startup. The first stage of funding when the startup is only at the concept or ideation stage is called the pre-seed round, and when the startup is building an MVP, which is a minimum viable product, or it is in the product development and market launch stage, it raises the seed round of funding.

The seed round is one of the most crucial funding rounds, as it will decide the startup’s fate. The right amount of seed funding and at the right timing can help the startup grow and flourish, but if not done properly, it can be the downfall of the startup before even its market launch.

 The startup can use the funds raised from the seed round for a variety of purposes, including:

 1.) MVP and Product Development: The startups usually use the money from the seed round to make a viable product that can be launched into the market successfully. If the product is developed but is not a viable product for market launch, then the startup tests it through a set of small consumer groups and improves it until it becomes a viable product for market launch. That’s how MVP works and helps in product development.

2.) Hiring and team building: As the product is in the development stage and may become ready soon for market deployment, the startup needs a good team to do it successfully. So in this stage, the startup hires and recruits team members who can be a part of the process and stay with the company in the long run. The engineers can help in product development and technology, the marketing team will help execute the right launch strategy, and executives and other team members will help the company and its operations run smoothly.

3.) Market Research and Positioning: As the product is about to be deployed or in development, in both cases, the startup should know the right audience for their product, so market research is also a crucial step in moving forward. The startups use the seed investment to do market research to find the right audience and find the right positioning for their product in the market.

4.) Legal and Compliance: The seed round will help the startup in the market launch, but before any of that happens, the company should be compliant with all the laws and legal documentation like trademarks, intellectual property, regulatory compliance, taxes, etc. So the money is also used here to become legally compliant.

5.) Infrastructure Cost: When the startup is ready to launch its offerings to the market and is also hiring aggressively, it needs to have the proper infrastructure to work efficiently and team management. So the seed round’s money also goes into infrastructure costs like moving to a bigger office in the right location, etc.

6.) Technology Cost: In today’s world, technology is part of every type of company, even when your product is not tech-related. If you are selling any type of product, you need a proper working website or an app to display or sell your products. You also need computers, server costs, etc., so a good amount of money goes into technology infrastructure as well.

So all these can be the costs or areas where the startups use money from the seed round, but they are not fixed; it depends from company to company on what stage they are in, what type of product they are into, and what they believe is best for their growth.

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