By Roger Wu

Roger Wu is a co-founder of the business-to-business content distribution network, Cooperatize.

 

While raising outside capital is not the only way to obtain financing for a startup, it seems to be the preferred method for new technologies where revenue or a business model is unclear. A common trend is emerging: more often than not, I hear that folks are raising their “seed round,” typically the initial money used to capitalize a company or if founders have capitalized, the first money taken from outside investors. This money could be from friends and family, along with some angel investors or venture capitalists. Some of the money could be “dumb” money (money with no other benefits attached); some could be “smart” money (money from a strategic partner, a well-connected angel investor, or an executive with deep, long-standing connections in the given industry).

Regardless, at the seed stage the company has many unknowns including, most likely, how they are going to return an investor’s capital with an acceptable return. Thus, a “seed round” is another way of saying, “we are raising very risky money.” Less common, are other folks telling me that they are raising an “Angel Round.”  I scratched my head at this, but I quickly realized that an angel round is USUALLY first money in (like a seed round) OR a post-seed round but a pre-series A round (a bridge round when you aren’t quite ready for venture capitalists but haven’t quite failed yet) as defined here.

But, wait! A few answers on Quora argue that the rounds are essentially the same; consistent with the context the founders are making (i.e. we’re raising risky first money in our venture). Seed financing refers to the life cycle of the company while angel financing refers to

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