Inside a seed round: SAFE or priced, dilution, and what investors check
You know where to go for funding. Now the question is how the round itself is built. A practical walkthrough of round instruments, dilution math, and the questions you'll be asked.
In our funding guide we covered the players: who funds what, and at which stage. Here we go inside the round itself: how it's written, how much of your company you give up, and what an investor looks for before wiring the money.
How much to raise?
Start from the plan, not from a number you heard from someone else. Ask yourself: what needs to happen in the next 12 to 18 months to reach the next stage? How many hires? What does it cost to operate? Raise what gets you there, plus a safety margin.
Seed rounds in Saudi Arabia vary a lot. These are disclosed examples from our directory:
| Company | Round | Amount | Date | Lead |
|---|---|---|---|---|
| Lucidya | Seed | $1.1M | January 2019 | Saudi Venture Capital Company |
| TruKKer | Seed | $1.4M | December 2017 | Raed Ventures |
| Tabby | Seed | $2M | November 2019 | Global Founders Capital |
| Floward | Seed | $2.75M | October 2020 | Impact46 |
| Lean | Seed | $3.5M | July 2020 | Raed Ventures |
| Tamara | Seed | $6M | January 2021 | Impact46 |
| Calo | Seed | $13.5M | December 2021 | Khwarizmi Ventures, Nuwa Capital and STV |
The gap between $1.1M and $13.5M isn't only about the year. It depends on the sector, how much capital the business needs to operate, and what it proved before the round.
The instrument: SAFE or priced round?
SAFE (simple agreement for future equity)
The investor pays now and gets shares later, in the next priced round. The two key terms:
- Valuation cap: the highest valuation their investment converts at, even if the next round is priced higher.
- Discount: a discount on the share price in the next round.
Its advantages are speed and low legal cost. Its downside is that dilution is deferred, and many founders sign several SAFEs and get a shock when they all convert at once.
Priced round
You agree a valuation with the investor now, and issue shares to them directly. It's clearer for both sides, but slower and more expensive legally, and comes with more terms (a board seat, voting rights, liquidation preference).
Which structure fits depends on where your company is registered and which law applies to it. Don't copy a foreign template and sign. Work with a lawyer who knows the market.
Dilution math, simply
An illustrative example: you raise $2M at a $10M post-money valuation.
- Investor's share = 2 ÷ 10 = 20%
- Your share as founders drops from 100% to 80%
And don't forget the employee option pool (ESOP). Many investors ask for it to be created before the investment, which means it comes out of your share, not theirs. Ask about it specifically.
YC's seed guide says most seed rounds dilute up to 20%, and advises not going past 25%. The numbers are from 2016, but the logic holds: later rounds will dilute more, so leave yourself room.
What investors check
| Area | Questions |
|---|---|
| Team | Why you? What's your experience with this problem? Are equity and vesting in order? |
| Market | How big is it really? Why now? |
| Signals | Is there growth, retention, or paying customers? |
| Numbers | Monthly burn, months of runway left, customer acquisition cost |
| Paperwork | Commercial registration, articles of association, ownership of code and brand, customer contracts |
What delays rounds most here: messy paperwork. A co-founder who left with their shares in limbo, or code written by a freelancer with no IP assignment. Fix this before you start. See our piece on equity and vesting.
How to run the round
- Set a window: four to eight focused weeks beat six scattered months.
- Bunch your meetings: investors move when they sense others are interested.
- Come in through an introduction: an intro from a founder they backed beats a cold message.
- Find the lead: a round moves once one investor commits and sets the terms. The rest follow.
- Read the term sheet with a legal eye: valuation isn't everything. Liquidation preference and veto rights sometimes matter more.
The strategic investor
Sometimes the investor is a company in your space. Moyasar raised a $21M seed round in March 2024 led by Jahez. This kind of investor brings more than money: a customer, distribution, or expertise. But think about the effect on your other customers, and on who can acquire you later.
The idea is from YC: A guide to seed fundraising.
