

Ask HN: What do start-ups need seed money for? - rickymm3

Is it server costs? Is it to rent a space somewhere and start building the business?  Hiring/Contracting??  what is the primary reason a start-up would need capital?
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jordhy
Well, first getting seed money is a small validation of your start-up idea and
team that helps raising more capital in the future.

The idea of seed funding is to help you create a prototype that you can show
to customers and determine what is the right product market fit for your
company. Typically, this process will last six months or so (however, every
company is different. Getting seed funding helps you quit your job, focus on
building the company and set things up the right way, right from the start.

You can get seed funding from angels, super angels, friends and family, crowd
funding, universities or seed stage VCs.

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redspark
I would say most of them need money so they can quit their day job(s) and
focus on building the product.

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rickymm3
Thanks for the reply. So, to clarify, raised capital goes into the pockets of
the founders? There is not typically a contract involved that requires company
registration (i.e. incorporated), or suggestion on where to put the money?

Thanks again!

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redspark
I have not raised money myself, but everyone I know who raised a seed round,
incorporating was one of the stipulations. There is always a contract (term
sheet), which spells out certain requirements. But typically the bulk of the
money raised, goes toward supporting the founders as they build/launch the
product.

