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Kogod School of Business
In the dynamic landscape of entrepreneurship, seed funds play a pivotal role in transforming innovative ideas into thriving businesses. Understanding what seed funds are and their significance is crucial for aspiring business leaders and entrepreneurs.
What is a Seed Fund?
A seed fund provides early-stage investments to help startups or entrepreneurs validate a business idea, develop a prototype, or conduct initial market research. These funds are typically raised from angel investors, venture capital firms, or even government grants, focusing on supporting innovative ventures during their earliest stages.
Why Seed Funds Matter
Validation and Traction: Seed funds help validate business ideas, indicating market interest and potential viability.
Early Growth: Seed funds enable startups to develop prototypes or Minimum Viable Products (commonly called MVPs), which are essential for attracting further investments.
Risk Mitigation: By investing at the seed stage, investors can mitigate risk while potentially earning substantial returns if the startup succeeds.
How to Become Involved in Seed Funds
Entrepreneurial Networks: Engage with local startup communities, incubators, or accelerators where seed fund opportunities are often discussed. CivStart, Techstars, and Dcode are all local accelerators in the DC area.
Pitch Competitions: Participate in pitch competitions that offer seed funding as prizes or networking opportunities with investors.
Angel Investors and VC Firms: Build relationships with angel investors and venture capital firms who specialize in seed-stage investments.
The best way to learn about seed funds is to work with one and invest real money in the startup ecosystem. Some business schools, including the Kogod School of Business, offer hands-on learning experiences that provide students opportunities to grow their investing skillset in real time.
Kogod School of Business Case Study: The Eagle Venture Seed Fund
Students at Kogod have an unparalleled opportunity to gain real-world experience in early stage investing through the Eagle Venture Seed Fund (EVSF). This student-managed seed fund is designed to provide American University (AU) students with hands-on experience in identifying, evaluating, and investing in promising startups.
Tommy White, Kogod professor and director of the Veloric Center for Entrepreneurship, says, “Students participating in the student-managed Eagle Venture Seed Fund will gain invaluable hands-on experience in evaluating early-stage companies for investment while building connections and lasting relationships with CEOs, angel investors, and venture capitalists. For AU alumni who are entrepreneurs, angel investors, or venture capitalists, supporting the Seed Fund—whether through mentorship, deal flow opportunities, or financial contributions—not only strengthens the entrepreneurial ecosystem at AU but also fosters the next generation of investors and business leaders.”
The Eagle Venture Seed Fund focuses on:
Experiential Learning: Students engage directly in deal sourcing, due diligence, and investment decision-making — the same type of work they might do in a future investing internship or job.
Real-World Impact: By investing in and providing mentorship to early-stage companies, students support innovative startups working in artificial intelligence, sustainability, social impact, and more.
Industry Connections: Students involved in the Seed Fund collaborate with angel investors, venture capital firms, and incubators across the East Coast, particularly in Washington, DC, building important business relationships and generating job opportunities.
How Kogod’s Eagle Venture Seed Fund Works
Each year, student managers screen 100 to 150 early-stage companies and make four to eight new investments. Investments are made through SAFE notes, convertible notes, or equity investments. Students oversee portfolio companies and provide reports to key stakeholders. Final investment decisions are confirmed by American University’s Office of Finance and Treasurer, with oversight from the Veloric Center for Entrepreneurship.
SAFE notes, convertible notes, and equity investments are all ways for companies to raise capital. SAFE is an acronym for a Simple Agreement for Future Equity. SAFE notes and convertible notes are popular financing tools for seed-stage startups, allowing investors to provide capital in exchange for future equity. SAFE notes convert into equity during a future funding round without accruing interest or acting as debt, while convertible notes function as short-term debt that converts into equity, often with interest and a maturity date. Unlike these instruments, equity investments involve purchasing ownership in a company upfront, giving investors direct stakes in its growth and success.
Seed funds are the lifeblood of innovation, fueling the startup ecosystem and driving economic growth. And the Eagle Venture Seed Fund shows there’s no need to wait to get engaged with early-stage investing—even business students can make impact with their investments.