Pre-Seed

What is a pre-seed round?

A pre-seed round is the first outside money a company raises, taken before a seed round and almost always on a convertible instrument rather than a priced sale of preferred stock. It funds the work that makes a seed round raisable: a first version of the product, a few customer conversations, one or two hires.

What does pre-seed mean?

It means earlier than seed, and that is close to the whole of its content. The word describes the position of a financing in a sequence, not a dollar amount, a valuation, an investor type or a legal structure. Two companies both raising what everyone calls a pre-seed can be doing very different transactions, one selling $200,000 of convertible notes to individuals and the other selling $2,000,000 of post-money safes to funds that do nothing else.

Is pre-seed a real, defined stage?

Not in any standard-setter's hands. No securities rule, accounting standard or industry body defines it, and the institutional datasets do not track it as a category. Cooley's quarterly venture financing report, one of the most widely read sources of round-level terms data, runs from Series Seed through Series D and later; there is no pre-seed bucket in it at all. In its second quarter of 2026 report Cooley covered 166 reported venture capital financings representing $85.7 billion of invested capital, and the earliest stage it names is Series Seed.

That absence is informative rather than a gap. Pre-seed rounds mostly are not priced rounds, so they do not generate the charter amendments and preferred stock terms that make up a financing terms dataset. What gets counted as a round at pre-seed is usually a stack of convertible instruments signed over several months.

The instrument

The usual instrument is a safe, and at pre-seed that generally means a post-money safe. Y Combinator, which created the form, describes a safe as a short contract an investor signs to fund a startup now in exchange for the right to shares of stock later, converting automatically when the startup raises a priced round. It says the safe was created at Y Combinator by Carolynn Levy in 2013 and used to raise over $15 billion for its portfolio companies.

The post-money version is the one Y Combinator publishes and uses as its standard. Y Combinator defines a post-money safe as a safe whose valuation cap is post-money, meaning the valuation of the company after the investment is made, so the cap includes the safe investment itself, and states that the post-money safe has been the Y Combinator standard since 2018. Its stated advantage is that the amount of ownership sold is immediately transparent and calculable for both founder and investor.

The other variant worth knowing at this stage is the safe with a most favored nation provision. Y Combinator describes an MFN safe as having no valuation cap or discount, instead automatically taking the cap or discount of any safe issued later, which lets an early investor commit without having to set those terms.

A worked example, from a published standard deal

Y Combinator publishes its own terms, which makes them the only pre-seed deal whose arithmetic can be checked against a primary source.

• The headline: Y Combinator invests $500,000, and says its investment gives it 7 percent of the company plus an incremental equity amount fixed when the company raises money from other investors.
• The split: $125,000 of that investment converts into a fixed 7 percent, and the other $375,000 is invested on an uncapped MFN safe. Check the addition: $125,000 + $375,000 = $500,000.
• The implied post-money valuation on the priced leg: $125,000 / 0.07 = $1,785,714.29. That is what buying 7 percent for $125,000 means on a post-money basis.
• The second leg only resolves later. Y Combinator's own illustration: in a typical scenario where the company raises its next safes at a $15,000,000 post-money valuation cap, the $375,000 MFN safe would convert into $375,000 / $15,000,000 = 2.5 percent of the company.
• Adding the legs in that scenario: 7 percent + 2.5 percent = 9.5 percent for $500,000.

Two things fall out of the arithmetic. First, the second leg gets cheaper for the founder the higher the next cap goes, which is the point of leaving it uncapped. Second, the post-money structure means the 7 percent does not dilute when later safes convert; those later safes dilute the founders instead. That is the transparency Y Combinator claims for the form, and it is also the part founders most often misread.

Who invests at pre-seed

Dedicated pre-seed funds exist and say so plainly. Hustle Fund states that it invests in pre-seed rounds, not seed, not post-seed, and that it may occasionally invest as a follow-on into a Series A round in existing portfolio companies but that its initial investments are at the pre-seed stage. It publishes a first check size of $150,000 and says it is comfortable setting terms and being first check into a company. Its fund sizes are Fund I at $11.5 million, Fund II at $34 million, Fund III at $46 million and Fund IV at $39 million, and it paces up to 100 investments a year.

Read those numbers together, because they describe the whole model. A $39 million fund writing $150,000 first checks at up to 100 investments a year is running a portfolio-construction strategy, not a concentrated one, and a founder pitching a fund like that is being underwritten on very little evidence by design.

What still has to be filed

Pre-seed informality stops at the securities laws. A safe is a security, and selling it is an offering. Rule 503 requires a notice of sales on Form D no later than 15 calendar days after the first sale of securities in the offering, rolling to the first business day following if that period ends on a Saturday, Sunday or holiday, and requires an amendment annually on or before the first anniversary of the Form D or of the most recent amendment if the offering is continuing. A pre-seed round assembled over eight months is exactly the case that triggers both.

Common mistakes

• Treating the valuation cap as a valuation. On a post-money safe the cap is the post-investment figure, so the ownership sold is fixed at signature rather than computed later.
• Assuming later safes dilute earlier post-money safe holders. They do not; they dilute the common stock.
• Stacking safes at rising caps without modeling the total. Each one is individually calculable under the post-money form, which is precisely why the sum is checkable and should be checked before a priced round.
• Missing the Form D. The first sale starts a 15 calendar day clock whether or not anyone has called the round closed.
• Reading a pre-seed fund's check size as its conviction. A fund writing a hundred first checks a year at $150,000 has a different relationship to any one company than a fund writing ten.
• Quoting a market median for pre-seed round size. The datasets that publish medians by stage do not have a pre-seed category.

How it relates to adjacent terms

A seed round is the thing pre-seed exists to make possible, and the practical boundary is not a dollar amount. It is whether the financing is priced. A seed round is frequently a priced round with a charter amendment, a Series Seed or Series A preferred class and a board provision; a pre-seed round usually is not.

The post-money safe is the instrument, and everything unusual about pre-seed ownership math comes from it. Understanding which side of a safe absorbs later dilution is worth more to a founder at this stage than any benchmark.

The valuation cap is the single negotiated number in most pre-seed rounds. There is no price per share, no liquidation preference to argue about and often no term sheet. The cap, and whether there is one at all, is the deal.