Seed Round
A seed round is a very early funding round in which investors back a project, often before it has a working product, at a lower valuation than later buyers pay. In crypto, seed investors usually receive tokens or the right to future tokens, locked under a vesting schedule.
Where the seed round fits
Projects often raise money in stages. A pre-seed round may fund the first idea and team. The seed round funds early development. Later rounds, sometimes called Series A or private and strategic rounds, follow as the project matures, and a public sale or exchange listing may come last. Each round typically pays a higher price per token than the one before, because the risk has fallen.
Seed investors are usually venture funds, angel investors and specialist crypto funds. They accept a high chance of total loss in exchange for a low entry price.
How crypto seed deals are structured
Some deals buy equity in the company with a token warrant, a right to receive tokens if they are ever created. Others use a SAFT, a Simple Agreement for Future Tokens, which promises tokens at launch. Either way, the tokens are usually locked with a cliff and vesting, and the round is recorded in the project's allocation table as a share of total supply.
An example of the price gap
Say a seed round buys 50,000,000 tokens at 0.02 dollars each, paying 1 million dollars and implying a 20 million dollar valuation for a 1,000,000,000 supply. Later the token lists at 0.50 dollars. On paper, the seed position is now worth 25 million dollars, 25 times the cost. Even if the price falls 80% to 0.10 dollars, seed investors are still five times up, which is why they may be willing to sell at prices that are painful for later buyers.
Why it matters to you and what to check
If you buy after launch, early investors are part of your supply picture. Check how large the seed and private rounds were, the price they paid, and when their tokens unlock. A large gap between their entry price and the market price, combined with near-term unlocks, is a common source of selling pressure.
Well-known backers are not a quality guarantee. Funds spread money across many bets and expect most to fail, and their incentives and time horizons differ from yours. Treat funding announcements as information, not as proof that a project will succeed.
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Frequently asked questions
Can ordinary investors join a seed round?
Usually not directly. Seed rounds are mostly private and limited to professional or qualified investors, partly because of securities rules in many countries.
What is a SAFT?
A Simple Agreement for Future Tokens is a contract in which an investor pays now and receives tokens later, once the network launches. Its legal treatment depends on the jurisdiction.
Why do seed investors pay so little?
They invest when the project is little more than a team and an idea, so the risk of losing everything is highest. The lower price compensates for that risk.
Related terms
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