Over the last ten years it has become increasingly difficult for an emerging fund manager to start a hedge fund with minimal assets under management, establish a track record and use that record to attract additional capital. With increased regulation on the horizon and its attendant compliance costs, not to mention investor wariness in the face of current economic conditions, the barrier to entry for hedge fund managers likely will increase even more. One way for a manager to break through this barrier is to enter into an agreement with a seed investor. In a typical seeding arrangement, the hedge fund manager or seedee receives start-up capital from a seed investor or seedor, typically a banking or other financial entity or else a fund of funds whose strategy is to invest in promising emerging managers. In return, the seedor participates (more often than not though a contractual right to a portion of the revenues of the seedee rather than a direct ownership interest). As a result, the seedor’s and the seedee’s interests appear to be aligned. Each benefits from an increase in the manager’s assets under management and positive performance. Yet, the seedor and the seedee have different expectations from a seeding arrangement. These expectations color how the two parties look at the terms of the seeding arrangement. In a guest article, Janet R. Murtha, a Partner at Warshaw Burstein Cohen Schlesinger & Kuh, LLP, explores the primary legal and business issues that frequently arise in seeding arrangements from the perspectives of both sides. In particular, from the perspective of seedees, she examines: objectives; the term of a seed commitment; capacity rights; and other matters. And from the perspective of seedors, she analyzes: objectives; reputational concerns and related due diligence; and back office concerns and related due diligence. Finally, she explains the economics of seeding transactions and the use and structuring of put and call provisions.