A company’s Seed or Angel funding round usually occurs around the initial idea stage or once the founder has a prototype and some indication of demand.
In this phase, you are just launching your startup and you need an investment to support your business operations until you can generate your own cash flow. Seed or Angel rounds often include investments from friends and family, or angel investors that specialize in getting involved with early stage companies. These rounds can also include crowdfunding and are usually for startups looking to raise under $1 million (typically $25k – $500k per angel).
Because this is the very beginning and your investors are putting in smaller amounts, there are fewer rules. Your investors receive equity or convertible notes (giving them a discount on shares during your next funding round) and typically since there is more risk investing at this stage, your investors are hoping for a higher return in the long run.