Stage
Seed
The round that turns early evidence into a repeatable business. Seed money usually funds a small team for long enough to reach Series A milestones.
A seed round funds a company that has early evidence (a product people use, first customers, a team) through the work of making that evidence repeatable. It is usually the first round in which professional investors write meaningful checks, and often the first in which someone "leads": sets the terms that others follow. By the end of the seed money, the company is expected to show the kind of progress that justifies a Series A.
What seed money pays for
- A small team beyond the founders: typically the first engineers and a first go-to-market hire. Salaries are usually most of the burn.
- Product iteration towards something a defined customer segment needs and keeps using.
- Repeatable acquisition: finding channels that bring customers at a cost the business can sustain.
- Enough runway to get there with a buffer. YC's SAFE guide notes that seed rounds have become independent rounds that often fund multi-year runways rather than short bridges.
Who invests and who leads
Seed rounds commonly combine a lead (a seed fund, a micro-VC, sometimes a multi-stage fund's seed program or a prominent angel) with angels and smaller funds following. The lead negotiates the price and terms, often takes the largest allocation, and may ask for a board seat in a priced seed. Without a lead, a round can still come together on SAFEs at a cap the founders set, but it usually takes longer. Building a target list by stage, check size and lead-or-follow behavior is covered in the investor list guide.
SAFE round or priced seed?
| Seed on post-money SAFEs | Priced seed (preferred stock) | |
|---|---|---|
| Closing | Rolling: each investor signs when ready | Usually one coordinated closing (sometimes with later closings) |
| Legal cost | Low; standard forms | Higher: charter amendment and several agreements |
| Ownership known | Before the priced round: amount ÷ cap for each SAFE | Immediately, on the cap table |
| Investor rights | Few: maybe a pro rata side letter and information rights | Preferred-stock rights, information rights, often a board seat, protective provisions |
| Option pool | Existing pool; the Series A will usually require an increase | Pool sized in the round, usually in the pre-money |
| Later Series A | All SAFEs convert at once | Seed preferred already outstanding |
At the same price and pool size the two cost the founders roughly the same, as long as the SAFE cap and the priced valuation are compared on the same basis (post-money to post-money) and the SAFE holders' later dilution by the Series A pool is counted. The differences are in time, legal cost and control. See priced rounds and post-money SAFEs.
How much of the company a seed round costs
Dilution at seed is the amount raised divided by the post-money valuation (or the post-money cap), plus any option pool created in the pre-money. In our example company, two SAFE rounds ($500,000 at $6 million and $2.5 million at $20 million) sell 20.8% before the Series A, taking the founders from 90% to 71.3%:
How much is reasonable is a judgment about what the next round will need to see and what the company will need to raise later. The more a seed round sells, the less is left for future rounds and for the team's equity. The cap-table simulator carries the seed through a modeled Series A so you can see the end state rather than the seed alone.
The option pool at seed
A seed-stage company needs options for its first hires. In a priced seed, investors normally require a pool sized for the hiring plan, counted in the pre-money (the option pool shuffle). With SAFEs, the existing pool and any options granted before the Series A are counted in the SAFE holders' capitalization, so SAFE holders are not diluted by those hires; YC's guide describes this as treating the SAFE like a priced seed round's pool. Size the pool from a list of planned hires and realistic grants, not from a rule of thumb.
What Series A investors look for
Expectations differ by sector and market cycle, so treat any single benchmark with suspicion. The common thread is evidence that growth is repeatable and the business can use a much larger round efficiently:
- A customer segment that adopts and keeps using the product, shown in retention or expansion rather than one-off sales.
- Revenue or usage growing at a pace that makes the next round's valuation plausible.
- A believable plan for how Series A money turns into growth: hires, channels, unit economics.
- A team that can scale: hiring done, key gaps known.
- Clean records ready for due diligence: cap table with all SAFEs modeled, IP assignments, Form D and state filings for earlier rounds.
Start raising with enough runway left to walk away from a bad offer. The runway calculator includes a "start raising by" date.
Sources
- Post-Money Safe User Guide, Y Combinator. Cited for facts; not reproduced.
- Model Legal Documents (term sheet, certificate of incorporation, investors' rights, voting and ROFR/co-sale agreements), National Venture Capital Association. Cited for structure; not reproduced.