Seed Funding

funding

Quick Definition

Seed is the first significant funding round—typically ₹2-10 crore raised from VCs/angels to achieve product-market fit, scale initial traction, and prepare for Series A.

Detailed Explanation

Seed round happens when you have MVP + early traction (5K-50K users or ₹2-10L MRR). Raised from: Seed VCs (Sequoia Surge, Accel, Lightspeed, Matrix), Angel networks (LetsVenture, AngelList), Strategic angels. Amount: India ₹2-10 crore. US $500K-$5M. Valuation: ₹20 crore-₹100 crore pre-money. Dilution: 15-25% typically. Use of funds: Hire core team (5-10 people), find product-market fit through iterations, grow to 100K users or ₹50L MRR (Series A metrics). Timeline: 18-24 months runway. Seed deck must show: Problem (validated with users), Solution (working MVP), Traction (growth metrics—MoM growth >20%), Team (why you can execute), Market size (₹1,000+ crore TAM), Unit economics (path to profitability), Ask (amount, use of funds, milestones). Seed stage failure: 60-70% of Seed companies never raise Series A (died or bootstrapped). Success: 30-40% reach Series A-worthy metrics.

Real-World Examples

Successful Seed

Raised ₹5 crore Seed at ₹30 crore valuation with ₹5L MRR. Used 18 months to reach ₹50L MRR (10x growth), 50K users. Raised ₹30 crore Series A at ₹200 crore valuation.

Failed Seed

Raised ₹8 crore Seed with just MVP (no revenue). Spent on large team, burned ₹5L/month. 18 months later: ₹10L MRR (not enough for Series A). Ran out of money, shut down.

Skipped Seed

Bootstrapped to ₹1 crore ARR. Raised Series A at ₹500 crore valuation directly. Founders kept 80% equity (vs 50-60% if raised Seed). Rare but possible.

Why It Matters for Your Startup

Seed is make-or-break round. Use it to find PMF and reach Series A metrics. Waste it on premature scaling (large team, expensive marketing before PMF) and you die. 70% of Seed startups fail—mostly from scaling before PMF.

Common Mistakes

❌Raising Seed too early (just idea, no MVP—raises at very low valuation)
❌Spending on growth before PMF (burn on ads while product doesn't retain)
❌Hiring too fast (10-person team when 4 would do—burns runway)
❌Not having 18+ months runway (Seed should last 18-24 months minimum)
❌Raising at inflated valuation you can't grow into (causes down round later)

Frequently Asked Questions

What traction do I need to raise Seed?

Minimum: Working MVP + 5K users OR ₹2L MRR. Good: 20K users + 50% MoM growth OR ₹5-10L MRR. Exceptional: ₹20L+ MRR (can skip to Series A).

How long does Seed fundraising take?

3-6 months typically. 50-100 investor meetings. 5-10 term sheets if traction is strong. 1-2 term sheets if early. Expect 3-4 months minimum start to wire transfer.

What should I do with Seed funding?

Priority 1: Find PMF (iterate until retention >40% Month 2). Priority 2: Grow to Series A metrics (₹50L-₹1 crore MRR). Priority 3: Build team. Don't: Premature scaling.

Ready to Find Your Startup Idea?

StartupIdeasDB has 3,000+ validated problems to help you build the next big thing.

Browse Problems →

Seed Funding - Definition, Examples & Formula | StartupIdeasDB Glossary | startupideasdb.com