Seed round explained: how it works, who invests and what you give up

What is a seed round?

It is the first outside money that pays for product, hiring and growth. Y Combinator's Guide to Seed Fundraising (2016) puts the rule simply: raise enough to reach the next fundable milestone, which for many founders means 12 to 18 months of runway. Timing depends on evidence rather than the calendar: raise when you have something to show and a clear plan for the money.

Pre-seed vs seed vs Series A: what changes?

The labels have no official boundaries, and the amounts behind them shift with markets and countries. We find it more useful to define each stage by what the startup has to prove:

If you are still before the seed, our pre-seed page covers what to build to get there; once the round is closed, the seed and go-to-market page covers what comes next.

How much equity do you give up in a seed round?

Usually up to about 20%, with around 25% as a sensible ceiling. That is the guidance in YC's 2016 seed guide: around 10% is excellent, most seed rounds go up to about 20%, and founders should try not to exceed 25%. The percentage comes from two numbers, how much you raise and what the company is worth afterwards.

With made-up numbers: if the company is worth $1.6 million before the round (pre-money) and you raise $400,000, it is worth $2 million afterwards (post-money) and the new investors own 20%. Everyone already on the cap table is diluted in proportion, including any contractors you paid with shares; see our guide to paying developers with equity.

SAFE, convertible note or priced round?

The choice is about when you set the valuation. YC's guide describes three options:

• SAFE (simple agreement for future equity). Created at Y Combinator in 2013, it has no interest rate and no maturity date; the main terms are the amount, a valuation cap and a discount. YC standardised on the post-money version in 2018.
• Convertible note. A loan that converts into shares at a later round, usually with a cap or discount, plus interest and a maturity date.
• Priced round. You set a valuation and a share price and issue new shares now. It is clearer for everyone but costs more in legal work.

One warning for founders outside the US: YC publishes SAFE templates for US companies and dedicated versions for Canada, the Cayman Islands and Singapore, and tells everyone else to work with a local lawyer. A SAFE is not a universal document; the instrument has to fit your company law.

Who invests at seed: angels, funds and tax-advantaged schemes

Angels invest their own money on their own terms. YC's guide notes that they decide faster than funds, which invest other people's money and need partner sign-off, and that in the US of 2016 a typical angel cheque ran from about $25,000 to $100,000 or more. Seed funds take more meetings, see far more companies and follow a more structured process.

Some countries add tax incentives that shape who invests. In the UK, a company using the Seed Enterprise Investment Scheme can raise up to £250,000 if it has fewer than 25 full-time equivalent employees and gross assets of no more than £350,000, and a trade no older than three years. Investors can claim 50% income tax relief on up to £200,000 a year, according to HMRC guidance updated in April 2026. If you raise in the UK, angels may ask about SEIS eligibility before anything else.

Raising a seed round in Italy: what is different?

The logic is the same; the network, the instruments and the incentives are local. Italy's angels are organised around IBAN, the Italian Business Angels Network, whose annual survey reports that Italian business angels invested about €920 million in total in 2025, on their own or in syndicates with venture capital funds. That figure includes rounds led alongside funds, so it measures deal flow involving angels rather than what a typical angel writes.

On the institutional side, CDP Venture Capital describes itself as Italy's main venture capital fund manager and runs a fund dedicated to accelerators and pre-seed and seed investment. Two practical notes for foreign founders: YC's SAFE templates are not written for Italian companies, so the instrument has to be built under Italian law with a notary, a lawyer and an accountant; and if you plan to mention investor tax incentives for innovative startups, check their current status on the Ministry of Enterprise's page first. The status itself is covered in our guide to Italian innovative startup requirements.

What do investors check before they wire the money?

That what you told them is true, and that the company can take the money without surprises. Our own preparation checklist, weighted towards the technical side where non-technical founders tend to be most exposed:

• Cap table and agreements. Who owns what, founder vesting, shareholder agreements, equity granted to contractors.
• IP. Code, trademark, domain and accounts in the company's name, with written assignments from everyone who built the product.
• Code and infrastructure. A company-owned repository, least-privilege access, automated tests, verified backups and enough documentation for a new developer to start.
• Personal data. Records of processing, privacy notices and vendor contracts; the basics are in our guide to GDPR for startups.
• Metrics. The numbers in the deck must be reproducible from product data, with the same definitions; the structure of the deck itself is covered in our pitch deck guide.
• Contracts and accounts. Customer, supplier and contractor agreements; books, debts and tax position checked by an accountant.