An IPO occurs when shares of a company are sold to the general public on a securities exchange (typically NYSE or NASDAQ) for the first time. The company needs to file a registration statement with the SEC, which includes detailed and complex disclosure, high costs with hiring lawyers, accountants, investment bankers, etc. In addition, the company has to provide ongoing annual and quarterly reporting, and any material corporate events and changes in shareholdings of insiders. The company can be sued for any "material misstatements or omissions" in its filings.
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Funds invested in a company at the very early stages of its life so that the business has enough funds to sustain itself until it is either able to continue funding itself, or has developed something of value so that it can obtain further rounds of funding through venture capital. Typically business founders provide their own seed capital, using savings, credit cards or funds borrowed from family and friends. Seed capital may also come from crowdfunding or angel investors. Investors make their decision whether to provide seed capital by considering the value of the idea, and the capabilities of the founder in launching the idea.