How a Round Actually Works
The mechanics , SAFEs, valuations, pro-rata, dilution , are not complicated. Most founders just never sit down with them.
#fundraising
The instruments
- SAFE , simple agreement for future equity. Used at pre-seed/seed. Converts at the next priced round.
- Convertible note , like a SAFE but with interest and a maturity date.
- Priced round (Series A and onward) , actual equity issued at a fixed valuation.
What the numbers mean
- Pre-money valuation , what the company is worth before the new money goes in.
- Post-money valuation , pre-money + amount raised.
- Dilution , your % ownership decreases when new shares are issued. Raising $2M on a $10M post-money = ~20% dilution.
- Pro-rata rights , existing investors' right to maintain their % in future rounds. Rarely good for founders to grant broadly.
Rough US benchmarks (not promises)
- Pre-seed: $250K , $2M raised, $5M , $12M post-money.
- Seed: $2M , $5M raised, $12M , $30M post-money.
- Series A: $8M , $20M raised, $40M , $100M post-money.
Every round you raise sets the floor for the next. Raise too high too early and you may not be able to grow into it.