Seed Financing Overview

INTRODUCTION

This practice note discusses seed financings. Start-up companies use seed financings primarily to raise the capital required to build a minimum viable product and test their product-market fit.

This practice note provides guidance to company counsel and founders on how to identify a seed investor and choose the financing method that best fits the company's needs. It covers the following topics:

• Types of seed investors
• Overview of seed financing legal instruments, including:
  
  
  • Convertible notes
  • Simple agreements for future equity (SAFE)
  • Preferred stock
• Securities law considerations

This practice note assumes that the company is a Delaware C corporation, which is the market standard for venture backed companies.