If you are building a SaaS or AI company right now, you are sitting in a strange moment. On one side, there has never been more money in the system. In 2024, over $83 billion went into startups, and as you head into 2025, over a trillion dollars is waiting to be invested across private equity and venture capital.
On the other side, only about 1% of startups successfully raise a seed round. That gap can feel brutal. You see big announcements on TechCrunch, but when you pitch, you hear “too early” or “come back later.”
This guide is here to help you close that gap. You will learn how seed funding for startups really works, how VCs think, and how to position your startup so investors take you seriously. You will also see how to protect your equity, skip some rounds if you want, and still build the company you dream about.
The lessons come from real experience. TK raised millions as a solo founder in New York, without Y Combinator, from angel investors like Esther Dyson, Scott Bannister, and Jason Calacanis, plus funds such as 500 Startups, Founder Collective, Jackson Square Ventures, and Andreessen Horowitz. He learned the hard way how this game works so you do not have to.
If you want a deeper, structured plan to grow your SaaS or AI startup, you can also grab TK’s free 5-Point SaaS Growth Strategy Guide. It breaks down how to think about your pitch, your market, and your go-to-market plan in more detail.
Why Now Is The Best Time To Raise Money For Your SaaS Startup
You are building in a “golden age” of software and AI. Capital is not the problem. Signal is.
Here is the bigger picture you are walking into:
- Capital is huge: tens of billions invested each year, with over a trillion dollars waiting to be deployed across funds.
- Only a few get it: a tiny share of startups ever close a proper seed round.
- Rounds are bigger and fewer: investors are placing larger bets on fewer companies, which you can see in current startup funding trends: larger rounds, smaller teams.
You are not trying to convince investors that startups matter. They already know that. You are trying to prove that your startup can become one of the few that move the needle for their fund.
That is why understanding how the game works matters so much. Once you know what each stage expects, what traction looks like, and where you fit, you can stop taking random shots and start running a clear process.
The Startup Lifecycle: Laying Out The Chessboard
Think of your startup like a game of chess. If you do not know where the pieces go, you cannot win. Fundraising is the same.
Most high-growth SaaS and AI companies move through a set of business stages:
- Idea
- Initial revenues
- Scalable revenues
- Repeatable revenues
- IPO or large exit
You might move at your own pace, but the pattern is the same.
Venture capital only fits a certain type of company. VCs want a path to at least $100 million in annual recurring revenue (ARR) and a potential exit worth billions of dollars. If your idea cannot reach that scale, traditional VC is a bad match and will only create pressure and stress.
Here is how funding stages map to your progress:
| Business Stage | Typical Round | Purpose of Capital |
|---|---|---|
| Idea | Pre-seed | Turn idea into product, search for product–market fit |
| Initial revenues | Seed | Prove people want it, build early systems and team |
| Scalable revenues | Series A | Pour fuel into what is working, build a real growth engine |
| Repeatable revenues | Series B | Professionalize, show repeatable growth and strong economics |
| Late scale / pre-IPO | Series C+ | Expand globally, M&A, prepare for exit or IPO |
Once you see the board like this, things get clearer. The question shifts from “How do I get money?” to “Where am I on this board, and what would an investor expect at this stage?”
Principle 1: Know The Key Stages Of Capital And What Each One Wants
You will save months of frustration if you match your story to the right stage. Each round has an unwritten rule about what “good” looks like.
Pre-seed: When Pedigree Matters More Than The Idea
At pre-seed, you usually do not have revenue. Often you do not even have a full product. So investors look at you.
What they really fund is pedigree:
- Prior success as a founder or early employee who made money for investors
- Top schools, like Stanford or MIT
- Early roles at breakout companies, like being one of the first hires at Stripe or Airbnb
That is why you see headlines like “Team raises $5 million on an idea.” It is not just the idea. It is the people behind it.
If you do not have strong pedigree, raising a pure pre-seed round is very hard. TK was in that spot. Solo founder, based in New York, not a YC grad, no big startup exit behind him. Instead of begging for a pre-seed, he focused on building, got to initial revenue, then raised a proper seed round.
Your move at this stage:
- If you have pedigree, lean into it and make your team story front and center.
- If you do not, stop wasting energy on endless pre-seed pitches. Build product, close some customers, and move toward seed.
If you are curious what a strong pre-seed or seed round looks like in the current market, you can look at this snapshot of top seed startups in 2025 to see which profiles tend to get funded.
Seed: Big Market Plus Real Traction
Seed is where most founders want to play. Here the bar shifts from pedigree alone to two big things:
- Total Addressable Market (TAM)
- Traction
TAM is the answer to “How big can this get?” Venture investors raise money from their own backers, called limited partners. A seed fund might be $100 million. They promise to return 3x to 5x that amount in about ten years.
The catch: most of their investments fail. Around 98% of bets will not return the fund. So every check needs at least a chance to be big enough to pay back the whole fund on its own. That is why they obsess about market size.
Traction is proof that the market actually cares. At seed, that is usually:
- Paying customers and early revenue
- Or active users who use your product often and invite others
Traction is not a waitlist of 50,000 emails. A waitlist is cheap. Getting users to use a working product, or pay, is hard. Investors know the difference.
If you want a structured walkthrough of what seed investors expect, the YC team has a short, very clear guide to seed fundraising that pairs well with what you are reading here.
Series A: Scalable Go-to-Market, Not Just A Good Product
By Series A, investors assume:
- The market is big enough
- People want what you built
Now they want to know if you can scale. That means:
- You have a repeatable way to get leads
- You know how to turn those leads into paying customers
- You have basic unit economics that make sense
In short, they are asking: “If we give you $10 million, do you know how to spend it to get a lot more customers?”
They also look at competition. If there is already a well-funded rival in your space, they will ask if you are the winning horse, or if they prefer to back someone else later.
Series B: A Financial And Forecasting Test
Series B feels much more like a financial review than an idea pitch. At this point, investors check:
- Your detailed financial statements
- Your forecasts and hiring plans
- Your continued TAM and competitive position
- Your ability to deploy tens of millions of dollars into growth
They want to see repeatability. In other words, you have built a machine that takes capital in and produces revenue out, again and again.
From seed onward, one word keeps coming back: traction. Products, stories, and vision all matter, but institutional investors write checks for traction first.
If you want a broader market view along with these stage basics, this 2025 seed funding guide gives a helpful overview of terms and options.
Inline image prompt: 4K, realistic photo of a diverse founding team gathered around a whiteboard with a funnel drawn labeled Awareness, Leads, Customers, Revenue, sticky notes everywhere, bright office lighting.
Principle 2: Think Like Investors – Angels Fund Dreams, VCs Fund Traction
A lot of founder pain comes from assuming all investors think the same way. They do not.
There are two big groups you need to separate in your mind.
Angels are high-net-worth individuals writing checks with their own money. They often:
- Care about your story and ambition
- Back you because they like you or believe in your mission
- Can invest earlier, even before you have strong traction or pedigree
In that sense, angels really do fund dreams.
Institutional VCs are different. They manage money that belongs to others, their limited partners. Their job is to protect and grow that money. So while they may love your dream, what they are really paid to fund is traction and a scalable go-to-market machine.
Traction that matters to VCs looks like:
- Growing monthly or annual recurring revenue
- Strong user engagement and retention
- Customers referring other customers
- Clear sales pipeline and conversion rates
When you pitch VCs, you are not just sharing a story. You are presenting a business engine. They want to see that if they add fuel (capital), the engine spins faster in a predictable way.
If you want to see the kind of companies that attract serious seed funding for startups today, browse through a list like funded pre-seed startups in 2025. Notice how often you see strong teams, clear markets, and signs of early traction.
Before you meet an investor, do a quick self-check:
- Is my TAM big enough?
- Do I have traction, or just a theory?
- Can I explain my go-to-market steps in simple terms?
That shift, from “please fund my dream” to “here is a machine that already works,” changes how investors react to you.
Principle 3: Nail The One Key Slide For Each Round
Founders often obsess over the whole pitch deck. Every slide matters, but at each stage there is one slide that carries most of the weight. If you get that one right, the rest of the story is much easier.
Pre-seed: Make Your Team Slide Unforgettable
At pre-seed, your team slide is the star. You want to answer:
- Who are you?
- What have you done before that proves you can win here?
- Why are you in the top 1% of people to tackle this problem?
Highlight prior exits, key roles at successful startups, or deep domain expertise. Show how your skills fit the problem. The idea is important, but at this stage, investors are mostly betting on you.
Seed: Make Your TAM Slide Bulletproof
At seed, the TAM slide is your anchor. This is where you show:
- The size of the problem in dollars
- The slice of the market you can realistically reach
- How that can lead to a venture-scale outcome
You still need to show traction, roadmap, and team. But when investors go back and talk about you inside their partnership, they will argue about your market first.
Get the logic clean. Use clear numbers and credible sources. Make sure your TAM is tied to your actual product, not a vague industry statistic.
Series A: Make Your Go-to-Market Slide Crystal Clear
At Series A, investors look closely at your go-to-market slide (or section). This covers:
- How you generate leads
- Your sales motion (self-serve, inside sales, enterprise, product-led)
- Conversion rates and payback periods
- How more money flows into that system
You want an investor to leave thinking, “If we give them $10 million, they already know where to put it and what they will get back.”
If you want help designing this growth engine, TK’s free 5-Point SaaS Growth Strategy Guide goes deeper into building a scalable go-to-market machine that can support a Seed or Series A story.
Series B: Prove Repeatability Across The Whole Business
By Series B, you usually have a more complex deck and a finance team to help you. But the heart of the story is repeatability:
- Are your growth channels still working at larger scale?
- Are your unit economics holding up?
- Can you show a credible path from here to IPO-level scale?
Think of Series B as “prove this is not a fluke.” Your slides around cohorts, retention, margins, and forecasting tell that story.
Bonus Principle: Skip Rounds To Limit Dilution And Keep Control
Every time you raise a priced round, you usually give up 15% to 20% of your company. Do that enough times, and one day you realize you own very little of the business you built.
The good news is, today you have more options. Software is cheaper to build, AI lets tiny teams move fast, and you do not always need a full stack of rounds. Founders are using two smart plays.
Play 1: Bootstrap Past Pre-seed And Seed
Some founders:
- Use savings, consulting, or small angel checks
- Keep the team tiny
- Grind until they reach clear product–market fit and real revenue
Then they raise a Series A as their first real institutional round.
By skipping pre-seed and seed, they avoid stacking two extra rounds of dilution. That can save 10% to 30% of the cap table and make a massive difference at exit.
Play 2: Raise One Small Round And Never Raise Again
Other founders raise a very small initial round, just enough to quit their jobs and get to profitability. After that, they use customer revenue to grow and never raise another equity round.
Zapier is the classic example TK mentions. They raised a small amount early, stayed profitable, grew beyond $100 million in revenue, and still have the flexibility to IPO on their own terms.
Both plays have a common pattern:
- You stay lean
- You focus hard on revenue and profitable growth
- You treat VC as optional, not oxygen
If you are working on a deep tech idea in the US and you want non-dilutive capital, you can also look at programs like America's Seed Fund from the NSF, which backs early tech companies without taking equity.
These paths are not “less serious.” In many cases, they lead to more wealth and control for you as the founder.
Quick Recap: Your Fundraising Cheat Sheet
Here is a simple way to keep the whole story in your head.
| Stage | What Investors Need To See | One Slide To Nail |
|---|---|---|
| Pre-seed | Strong team and pedigree | Team |
| Seed | Big TAM and real traction | TAM |
| Series A | TAM, traction, scalable go-to-market | Go-to-market |
| Series B | Solid financials and repeatability | Repeatability / Metrics |
On top of that, remember your bonus options:
- Bootstrap to a big first round to avoid early dilution
- Or raise a small amount once, then grow from revenue and skip future rounds
Either way, you are playing the game with your eyes open.
Conclusion: Play The Game On Your Terms
You now know how the venture game is set up, what each funding stage expects, and which slide matters most when you pitch. You also know that traction, not dreams, is what gets you real checks from serious investors.
Your next move is simple. Decide where you are on the chessboard, pick the right target round, and focus on the one thing that will move you into that 1%. That might mean more customer calls, a tighter go-to-market plan, or a lean season of bootstrapping so you keep more of what you build.
If you want help putting all of this into a concrete plan, grab TK’s free 5-Point SaaS Growth Strategy Guide and start turning your idea into a fundable, scalable business. Seed funding for startups is not magic. It is a game with clear rules, and now you know how to play it with calm confidence.
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