Funding Rounds Beginner

Seed Round

An early fundraising round, typically $1M-$5M, to prove product-market fit.

Definition

The seed round is one of the first significant fundraising events for a startup, typically raising $1M to $5M. It is used to hire an initial team, build the product, and find early customers. Seed rounds are often priced rounds (with a set valuation) or done via SAFEs. Investors include seed-stage VC funds, angel syndicates, and accelerators.

Why it matters

The seed round sets an early valuation benchmark for your company. If you join around the seed stage, your options are struck at a low 409A price, giving you more upside if the company grows. This is also when the first formal option pool is often created.

Example

A startup raises a $3M seed round at a $12M post-money valuation, selling 25% of the company. The 409A valuation is set at $0.30/share, which becomes the strike price for employee options.

Related terms

Pre-Seed
The earliest fundraising stage, typically raising $100K-$2M from angels or small funds.
Series A
The first major institutional funding round, typically $5M-$20M, for companies with proven traction.
SAFE (Simple Agreement for Future Equity)
A simple investment contract that converts to equity at the next priced round.
409A Valuation
An independent appraisal of common stock value that determines your option strike price.
Option Pool
A block of shares reserved for granting stock options and RSUs to employees.
Strike Price
The fixed price you pay to buy shares when exercising your stock options.
Post-Money Valuation
What a company is worth immediately after receiving new investment (pre-money + new capital).

More from Funding Rounds

This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.