seed capital vs venture capital

In the business world of the United Kingdom, Seed Capital and Venture Capital are twin money generating sources you may need especially when you’re starting off your business venture. However, both are not the same technically speaking. Both sources are similar in some cases but yet they differ a lot in so many aspects. 

In order to understand what Seed Capital and Venture Capital stand for, there is need to take a look at them from three different angles namely: 

– The Definitions 
– The Similarities 
– The Differences 

The Definitions:

Seed Capital and Venture Capital have their own separate definitions loaded with meaning. You need to take cognizance of this fact in order to maximize their benefits as they suit your business plan.

Seed Capital:

Simply speaking, Seed Capital refers to the cash you need to get your business started. This cash could come from your family members, friends and other external individuals. In the United Kingdom, these external individuals refer to UK angel investors. These are wealthy personalities who have what it takes to fund your business at the initial stages. Angel investors UK normally fill the gap when you’re not able to source for the seed capital from your immediate family and friends. Indeed, not everyone has wealthy family members and friends. Hence, for such people, going to meet the UK angel investors should be the best option. Thus, seed capital is simply the fund you need to get your business off the ground. 

Venture Capital:

Venture Capital which is also known as VC refers to fund needed to start a bigger business. This time around, the target is mainly for group of individuals who are interested in building real bigger firms or companies. The Venture Capital is mainly provided in real cash in exchange for the shares in the company that is demanding for such fund. Venture capital is mainly sourced from venture capitalists that raise the needed fund from their dexterity in managing the pool of other people’s money. They usually invest these funds in lucrative companies that are sure to yield quality returns. Many times, groups of individuals that want to use venture capitals should be able to establish technological companies, info tech companies, or any other profit yielding business venture with technological background. This is because; venture capitalists believe that such companies when they actually begin operation are likely to grow in leaps and bounds.

The Similarities:

Indeed, there are some real similarities between Seed Capital and Venture capital. First of all, both are simply avenues designed to raise good cash for the smooth take-off of business ventures. This is actually the primary similarity you’ll notice in both portfolios.

Another similarity you’ll find lays in the fact of the involvement of the UK angel investors in both avenues. Angel investors based in UK usually offer seed capitals to individuals that need them especially those of them starting out in business. In the same vein, some of these UK angel investors do get involved in Venture capital. However, in this case, they assume another nomenclature. UK angel investors that grant venture capitals to companies are known as Venture capitalists. They have their own system of investing in larger business ventures. 

The Differences:

Indeed when it comes to the differences, you’re going to discover a lot between seed capital and venture capital. The differences are very clear and direct.

The very first difference you’ll notice is the fact that venture capital is mainly meant for big companies only. As an individual trying to begin your own business, you don’t need to go for venture capital. You won’t get it. This is because, the investors there, are targeting big companies. Hence, venture capital could only be accessed by group of individuals that really have a clear cut proposal geared toward the establishment of a big company. In most cases, technological companies are preferred. On the other hand, seed capital is mainly for individuals who are starting up. You can always get this assistance from UK investors who are always there to help. 

Another important difference between Venture Capital and Seed Capital lies in the fact of the various sources of the fund involved. Under the seed capital investment, most UK angel investors involved normally invest their own personal funds directly. On the other hand, when it comes to venture capital, the sources of the fund are not directly from the pockets of the inventors involved. Venture capitalists get the money from the pool of professionally managed fund belonging to others. This is the main reason why, they don’t invest in ordinary individuals. This risk might be too much. 

Again, another difference between seed capital and venture capital lies in the fact of the usage of such funds. While venture funds are normally used in helping big companies get started, seed capital could be used by a single individual to get his or her business off the start-up line. In most cases, the companies that normally have the venture capital usually have technological and scientific backgrounds. The investors that grant the funds always like to invest in ICT and technological companies which they are sure will see the light of the day. They do this because; the venture money belongs to a group of people who allow their combined cash to be used in investment. Such funds are therefore not invested anyhow since the goal is to realize enough gain from it. On the other hand, seed capital is simply used in setting up small and medium scale businesses. However, the individual involved must have to present the UK angel investors with realizable business plan that may not tie the fund down once it is released. 

Finally, another difference between Seed Capital and Venture Capital is also noticed in the volume of cash that is usually released. While Seed Capital is usually not all that too big money, Venture capital is usually a very handsome amount that can help a big company take off. In this case, the investors are also normally involved in the growth process of the company being sponsored.