Every week this site reports on women who raised money. The labels in those stories (pre-seed, seed, Series A) are industry shorthand, and they can make a round sound more official than it is. Here is what sits underneath them, based on the SEC's own plain-language guides.
The round names are not legal categories
Founders and investors sort rounds by who is buying and how far along the company is: friends and family, angels, seed, Series A. Federal securities law does not sort them that way. The SEC explains that whatever a company calls its round, the deal has to fit an exemption from registration, and the usual route is Regulation D with sales to accredited investors.
So a round's name tells you roughly where a company is in its life. It does not tell you which rules it raised under. The public filing does.
Who invests at each stage
Friends and family come first, usually in a pre-seed or seed round. They invest because they know the founder, through loans, convertible debt or equity, and the SEC puts these deals at around $10,000 to $50,000.
Angel investors are generally wealthy individuals putting in their own money. Most are accredited investors, many have built companies themselves, and they often team up in syndicates. The SEC describes pooled angel deals of $200,000 to $400,000 and says angels invested over $17.9 billion in 2024.
Venture capital funds are private funds that back fast-growing companies from Series A onward and often come back for later rounds. Most of their investments take the form of equity such as preferred stock, and the SEC reports venture investment rising from about $164 billion in 2023 to about $215 billion in 2024.
What investors actually get
The SEC's guide to startup securities lists the usual instruments:
- Common stock tends to go to founders, while preferred stock, with its own voting and economic rights, tends to go to outside investors.
- A convertible note is a loan that typically turns into preferred stock when the next round closes. Seed rounds use them because a young company is hard to value.
- A SAFE (simple agreement for future equity) is a promise of a stake later, if a set event happens, such as a new round or a sale. Until then the investor owns nothing, and a SAFE generally puts no valuation on the company when it is signed.
That last point matters when you read a headline: a seed round raised on SAFEs may have no price attached yet.
Who is allowed to invest
Many private rounds are open only to accredited investors. For individuals, the SEC's tests include a net worth over $1 million not counting a primary home, or income over $200,000 (or $300,000 with a spouse or partner) in each of the past two years. Some licensed professionals, and the company's own directors and executive officers, qualify too.
Under Rule 506(b), a company can raise an unlimited amount from an unlimited number of accredited investors. In exchange it cannot advertise the offering, and it can sell to no more than 35 non-accredited investors in any 90-day period.
The paperwork that follows
A company raising under Regulation D files a notice called Form D within 15 days after its first sale. Filing costs nothing, and the notice becomes public on EDGAR, the SEC's filing system. That public record is how reporters, and you, can check a round.
The lesson worth keeping
A round's name is a story about stage; the instrument and the filing are the facts. When a founder announces a seed round, the useful questions are: raised on what (stock, a note or SAFEs), from whom (friends, angels or a fund), and is there a Form D?
Quick answers
What is a SAFE in startup funding?
A simple agreement for future equity is a promise of a stake later, triggered by an event such as a new round or a sale. Until then the investor owns no shares, and there is usually no valuation set (SEC).
Do seed and Series A rounds follow different laws?
No. Round names are industry labels; any round has to fit an exemption, most often Regulation D (SEC).
Who counts as an accredited investor?
Among other tests, a person with net worth over $1 million not counting a primary home, or income over $200,000 ($300,000 with a spouse or partner) in each of the last two years (SEC).
