Seed capital is the first substantial investment in a new fund, provided by a seeder in exchange for preferential terms such as reduced fees, a share of the manager's revenue or equity in the management company. It gives the fund enough scale to attract other investors.
Seeders range from dedicated seeding platforms and funds of funds to family offices and the manager's own network. Seed deals are typically US$10 million to US$100 million for a period of two to three years, with a revenue share of 15% to 25% [industry estimate: cite before publishing] or a founders class.
First-loss arrangements are a variant in which the seeder's capital absorbs initial losses in exchange for a larger share of profits.
Managers on POD can accept seed capital on any terms agreed with the seeder; founders classes and side letters are supported. POD Discover is one route to seeders, alongside a manager's own network.
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