Fundraising
Startup fundraising: rounds, terms and what they do to ownership
A fundraise is three decisions that compound: how much you raise, at what valuation, and what else goes into the pre-money — usually an option pool increase and any converting SAFEs. The headline valuation is the least informative of the three. Model all of them together before you agree a term sheet, because they are settled at the same moment.
The anatomy of a priced round
- 1Agree the pre-money valuation and the amount raised. Post-money is the sum of the two.
- 2Agree the option pool: its size after closing, and whether it is created pre-money or post-money.
- 3Convert outstanding SAFEs and notes at their own terms, not at the round price.
- 4Price the round: pre-money valuation divided by the pre-money share count, including any new pool.
- 5Issue the investor shares and recompute every holder's fully diluted percentage.
Instruments and when they are used
| Instrument | Priced? | Typical use | Main risk to founders |
|---|---|---|---|
| SAFE | No | Pre-seed and seed, fast closes | Stacked SAFEs converting together at a low cap |
| Convertible note | No | Bridges, some seeds | Accrued interest and maturity pressure |
| Priced equity | Yes | Seed onwards | Pool shuffle and preference terms inside the pre-money |
SAFE
- Priced?
- No
- Typical use
- Pre-seed and seed, fast closes
- Main risk to founders
- Stacked SAFEs converting together at a low cap
Convertible note
- Priced?
- No
- Typical use
- Bridges, some seeds
- Main risk to founders
- Accrued interest and maturity pressure
Priced equity
- Priced?
- Yes
- Typical use
- Seed onwards
- Main risk to founders
- Pool shuffle and preference terms inside the pre-money
Terms that move ownership more than the valuation
- Pool shuffle: a pre-money pool increase is funded entirely by existing holders.
- Liquidation preference: changes who gets what at exit, not the percentage.
- Conversion caps on SAFEs: a low cap can cost more ownership than the round itself.
- Pro rata rights: determine who can defend their position in later rounds.
- Anti-dilution: matters only in a down round, but matters a great deal then.
Prepared by Perseids for general information. It is not legal, tax or investment advice — confirm your specific situation with your advisers.
Frequently asked questions
- How much should a startup raise?
- Enough to reach the milestones that justify the next round's valuation, plus a margin. Raising more at the same valuation buys runway with ownership; raising less shortens the window in which the milestones must land.
- How much dilution is normal in a round?
- Selling 15–25% of the company is a common range for a priced round, before any pool increase. The pool and any converting SAFEs are usually what push the actual founder dilution above that band.
- Should I take a SAFE or price the round?
- SAFEs close faster and defer the valuation debate; a priced round settles ownership definitively. The risk with SAFEs is arithmetic rather than legal: several of them, each with a cap, can convert into far more of the company than expected.
Put this into practice with Perseids.
Run a funding scenario in Perseids