Seed Equity


An alternative structure for seed funding involves the creation and issuances of Preferred Stock. By purchasing Preferred Stock, investors become owners of the company and a valuation for the company is set. Ownership entitles the investors to voting and other rights, and although the NVCA and other organizations have created templates to lower the cost of structuring and papering these transactions, they remain complex and more expensive than seed loans. However, due to the benefits described in this paragraph, it is not uncommon to structure seed funding in excess of $1.0 million as a seed equity financing.

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