10 Seed: The first priced round
This chapter covers
- Have you met all the requirements for seed financing so you don’t waste time needlessly?
- Can you decipher pre-money and post-money valuations?
- Wouldn’t you prefer the lower stress of a seed financing instead of jumping right into the high-stakes Series A world?
- Once you land your seed, what must you keep your eyes firmly on? The Series A prize!
Seed is the first organized, formal, priced round of equity financing for a startup company. It precedes Series A. (Some legal firms call seed Series Seed.) Series Seed comes after a very young startup is formed and may or may not yet have received any sort of financing. Seed used to be the domain of angel investors, but the recent times I have raised seed, it has included VCs as well as angels. In fact, Dover’s seed had VC, angel, and strategic investors.
Think of seed like kindergarten versus the big time of grades and tests and stress; seed is great practice for doing all the things you will have to do for later rounds but with easier grading. We will look at what types of firms invest in seeds so you know where to go when you are ready. Speaking of ready, we will look at the requirements you need to meet before you are ready to close a seed round. This is a good time to explain the meanings of pre- and post-money valuations—terms you will hear a lot from investors from now on.