How to Run a Seed Funding Round Step by Step

Raising a seed round is one of the most consequential things a startup founder does — and one of the least understood. Most guides focus on "how to pitch." This guide focuses on the operational side: how to prepare your company for fundraising, how to structure the round, how to manage due diligence, how to close efficiently, and what to do immediately after the money lands. Whether you are raising £250K from angels or $2M from a seed fund, the mechanics are the same.

Phase 1: Pre-fundraising preparation (2-4 weeks before)

The biggest mistake founders make is starting investor conversations before they are operationally ready. When an investor moves quickly and asks for your data room, you do not want to spend two weeks scrambling. Here is what to prepare in advance:

Legal housekeeping

• Company formation: ensure your company is properly incorporated, with up-to-date Articles of Association (UK) or Certificate of Incorporation and Bylaws (US/Delaware).
• Founders' agreement: if co-founders have not signed one, do it now. This should cover equity split, vesting, IP assignment, roles, and departure terms.
• IP assignment: make sure all intellectual property created by founders, contractors, and employees is properly assigned to the company. This is a deal-breaker for investors.
• Employment/contractor agreements: every person who has contributed to the company should have a signed agreement with IP assignment and confidentiality clauses.
• Cap table: clean, accurate, and showing all shares, options, and convertible instruments. Cross-check against your company register.

Data room setup

A data room is a secure, organized folder structure that contains every document an investor might request during due diligence. Build it before you start fundraising so you can share access instantly when asked. Standard folders include:

• Corporate documents (formation, Articles, share register, board minutes)
• Financial information (P&L, balance sheet, projections, bank statements)
• Commercial (pitch deck, one-pager, customer metrics, pipeline)
• Legal (IP assignments, employment agreements, material contracts)
• Cap table (current snapshot + any convertible instruments)
• Compliance (GDPR records, insurance, regulatory filings)

Phase 2: Choosing your instrument

At seed stage, you have three main options for structuring the investment:

Phase 3: Valuation at seed stage

Seed-stage valuation is more art than science. There is no reliable DCF model for a company with 6 months of revenue. Instead, valuation is driven by market comparables, investor demand, team strength, and traction. Here are practical guidelines:

• UK seed rounds (2025-2026): pre-money valuations typically range from £1M–£5M for pre-revenue startups and £3M–£10M for startups with meaningful traction.
• US seed rounds (2025-2026): pre-money valuations typically range from $3M–$12M for early-stage and $8M–$20M+ for startups with strong metrics.
• Target dilution: most seed investors aim for 15–25% ownership. Work backwards from the amount you want to raise and the dilution you are willing to accept to arrive at a valuation range.

Phase 4: Investor outreach and pipeline management

Fundraising is a sales process. Treat it like one:

• Build a target list: identify 50–100 investors who invest at your stage, in your sector, and at your check size. Use Crunchbase, AngelList, and VC websites to filter.
• Warm introductions: the best way to reach an investor is through a mutual connection who can vouch for you. Map your network and ask for specific introductions.
• Batch your meetings: try to compress initial meetings into a 2–3 week window. This creates urgency and allows you to compare offers side by side.
• Track everything: use a CRM or spreadsheet to track every investor interaction — first contact, meeting date, follow-up status, term sheet status, and close.
• Create FOMO ethically: when you have genuine interest from multiple parties, let other investors know (without lying). Competitive dynamics accelerate decisions.

Phase 5: Term sheets

A term sheet is a non-binding document that outlines the key terms of the investment. It is issued by the lead investor and sets the framework for the legal documents. Key terms to understand and negotiate:

• Valuation (pre-money and post-money): confirms the price per share and your ownership after the round.
• Investment amount: total raise and per-investor allocation.
• Option pool: size and whether it is carved from pre-money or post-money (see our separate guide on option pools).
• Liquidation preference: typically 1x non-participating at seed stage. This means the investor gets their money back before common shareholders in an exit. Avoid anything above 1x and be cautious about "participating preferred."
• Board seats: whether the lead investor gets a board seat. Common at seed if the lead writes a significant cheque.
• Pro-rata rights: the investor's right to participate in future rounds to maintain their ownership percentage.
• Information rights: what financial and operational information you must share with investors (monthly/quarterly reports).
• Founder vesting: investors almost always require founders to be on a vesting schedule if they are not already.

Phase 6: Due diligence

After signing the term sheet, the investor conducts due diligence. If you prepared your data room in Phase 1, this should be straightforward. Typical DD requests at seed stage include:

• Cap table and share register
• Founders' and key employee agreements
• IP assignment confirmation
• Existing investor agreements (SAFEs, notes)
• Financial statements and projections
• Material contracts (customers, suppliers, partners)
• Corporate governance documents (Articles, board minutes)
• Compliance records (GDPR, regulatory)

Phase 7: Closing the round

Closing involves signing the legal documents and wiring the investment. Key documents typically include:

• Subscription Agreement: the investment contract specifying shares purchased and price paid.
• Shareholders' Agreement: governs the relationship between all shareholders (information rights, transfer restrictions, drag/tag-along).
• Amended Articles of Association: updated to reflect the new share class and investor rights.
• Board resolution: authorizing the share issuance.
• Disclosure letter: any exceptions to the warranties the company gives to investors.

These documents require signatures from founders, existing shareholders, and new investors. Using an e-signature platform speeds this up dramatically — especially when you have multiple investors signing the same documents.

Phase 8: Post-close operations

The money is in the bank. Now what?

• Update the cap table: record the new shares issued, update ownership percentages, and archive a dated snapshot.
• File with Companies House / state records: update your share register and file any required returns.
• Tax filings: in the UK, file an SH01 and update your annual confirmation statement. In the US, update your stock ledger and issue 83(b) notices if applicable.
• Investor communication: send a closing email to all investors confirming the round details, board composition, and reporting cadence.
• Set up reporting: establish monthly or quarterly investor updates. A simple format (metrics, wins, challenges, asks) keeps investors engaged and helpful.
• Start executing: you raised money to build something. Time to execute against your plan.

How eSignHub streamlines seed round operations

eSignHub is built for exactly this workflow. You can manage your data room (deal room), send subscription agreements for e-signature, track signing status across multiple investors, update your cap table after closing, and keep a complete audit trail — all in one platform. Instead of juggling DocuSign for signatures, Google Drive for documents, and a spreadsheet for your cap table, you have a single source of truth.