Select the correct options related to seed capital finance.

A. The prototype is being developed and fully tested

B. It refers to the capital required an entrepreneur for conducting research at pre-commercialization stage

C. Idea has been transformed into a product

D. Prototype of the idea is not fully developed or tested

E. A management team is formed

Choose the correct answer from the options given below:

B and D only

Correct answer is Option B i.e. B and D only

Seed capital finance: It refers to the capital required by an entrepreneur for conducting research at precommercialization stage (B). During this stage, the entrepreneur has to convince the investor (VC) why his idea/product is worthwhile. The investor will investigate into the technical and the economical feasibility of the idea. In some cases, there is some sort of prototype of the idea/product that is not fully developed or tested (D). As the risk element at this stage is very high, investor (VC) may deny to assist if he does not see any potential in the idea. Entrepreneur's ability, technological skills and competencies are required to match with the market opportunities so as to successfully convince about product/idea's feasibility to the venture capitalist.

Start up finance:  If the idea/product/process is qualified for further investigation and/or investment, the process will go to the second stage; this is also called the start-up stage. A business plan is presented by the entrepreneur to the VC firm. A management team is being formed to run the venture (E). If the company has a board of directors, a person from the VC firms will take seats at the board of directors. While the organisation is being set up, the idea/product gets its form. The prototype is being developed and fully tested (A). In some cases, clients are being attracted for initial sales. The management-team establishes a feasible production line to produce the product. The VC firm monitors the feasibility of the product and the capability of the management-team from the board of directors.

Second-round financing: At this stage, we presume that the idea has been transformed into a product and is being produced and sold (C). This is the first encounter with the rest of the market, the competitors and attempt is to squeeze in the market and get some market share from the competitors.