Pre-seed and Seed Stage Equity Investment Transactions

Summary

This practice note will explore direct pre-seed and seed equity financing transactions for start-up companies and the documentation (including recent trends) that memorialize such transactions. After receiving initial investments from its founder(s) and the founders' family and friends, today's earlystage start-ups generally raise capital from outside investors primarily through equity or convertible debt financing transactions. Depending on the company's capital needs and level of development, early stage financings may provide, among other benefits, the funding to help a start-up turn its ideas into a minimum viable product or enable it to continue testing and building out a product. While the parameters for early stage funding may vary among the participants in the start-up community, generally pre-seed transactions are known as relatively smaller amounts of funding (in the range of $500-$750K) in a pre-product start-up company, while seed rounds are larger investments that can ...