Early-stage round names are mostly bullshit (Oversubscribed Weekly #40)

Max here. Let’s take a break from the political crisis engulfing our country for some lighthearted fundraising advice!

I enjoyed this tweet from TechCrunch writer Kate Clark about the difference between seed and pre-seed rounds. Spoiler alert: there is none.

In the past few years, the average size of seed and pre-seed rounds has converged right around $2mm, and while the average valuation of pre-seed rounds remains slightly lower, the difference isn’t substantial.

This research backs up something I’ve been telling people for a long time: until Series A, round names are mostly marketing. So when you’re raising an early round, don’t worry too much about what round it “actually” is. Just call it whatever sounds best.

Here’s what I usually recommend. (Note that this is just a quick-and-dirty heuristic—you can and should adjust it based on your particular circumstances.)

• Anything under $1mm is angel round
• Anything from $1–$1.5mm is pre-seed
• Anything north of $1.5mm is a seed round if you think you can make it straight to Series A from there and a pre-seed round if you think you’ll need another round of funding before Series A (that way, you avoid having to raise a bridge round)

But most importantly: remember that these names are almost entirely marketing-speak. Sure, raising a pre-seed round and then a seed round sounds better than raising a seed round and then a bridge round. But if the amounts and valuations are the same, good investors will see past the names.

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