Seed Funding

Seed funding is the first institutional money most startups raise. It comes after friends & family or angel investment, and before Series A. The goal: prove your product works and that customers want it. **What seed funding is for:** Building your MVP or v1 product. Validating product-market fit with real customers. Hiring your first employees (usually 2-5 people). Getting to meaningful traction—revenue, users, engagement metrics that prove the business can scale. Seed is NOT for scaling. You're not hiring a sales team or spending big on marketing. You're learning whether this business can work at all. **Typical seed round:** - Amount: $500k to $3M (sometimes up to $5M for hot startups or experienced founders) - Valuation: $3M to $15M post-money - Dilution: 10-25% equity - Investors: Seed VCs, angels, accelerators (YC, Techstars), micro VCs - Timeline to Series A: 12-24 months **What investors want to see:** You don't need revenue yet, but you need evidence the business can generate revenue. That means: - Early users or customers (even if not paying yet) - Product that solves a real problem (validated through user interviews or MVP testing) - Strong team (especially technical cofounder if you're building software) - Large addressable market (at least $1B) - Clear path to Series A metrics (usually $1-2M ARR for B2B SaaS) **Pre-seed vs Seed:** Pre-seed is earlier and smaller ($100k-$500k), usually from angels or pre-seed funds. You might not even have a product yet—just an idea, prototype, or founding team. Seed is for startups that have built something and need capital to validate it in market. **Seed vs Series A:** Seed proves the product works. Series A proves the business model works and is ready to scale. Seed: Do people want this? Series A: Can we sell this repeatably and profitably? Series A typically requires $1-3M ARR for B2B SaaS, or 1M+ engaged users for consumer products. **Common mistakes at seed:** - Raising too much money, creating pressure to scale before PMF - Raising too little and running out before finding PMF - Spending on marketing before nailing product and retention - Hiring too fast ("we raised $2M, let's hire 10 people") **The seed fund playbook:** Most seed investors expect 3-5x of their investments to fail completely, 3-5x to return 1-3x, and 1-2x to return 10x+ (the winners that cover the losses). This means they're looking for massive upside potential, not steady growth. If your business can't plausibly become a $100M+ company, it's not venture-backable. If you're building a profitable lifestyle business, don't raise VC. Bootstrap or take angel money with different expectations.

Airbnb raised $600k seed in 2009 from Sequoia and YC. Uber raised $1.25M seed in 2010. Notion raised $2M seed in 2018. Modern hot startups sometimes raise $5M+ seeds from top-tier VCs betting early.