The aggregate proceeds in the Series Seed docs is simply the total amount of money the company is setting out to raise in the round of financing.
Entrepreneurs should consider a number of factors when establishing the aggregate proceeds.
First, consider the amount required for the company to reach the next round of funding. The amount of time a startup has before it runs out of money is called the runway. Startup runway provides an essential perspective for budgeting, hiring and strategizing throughout the startup’s lifecycle. Most seed stage startups calculate for about 18 months of runway. Entrepreneurs should calculate the runway (building in a bit of margin) in preparation for fundraising.
Second, entrepreneurs must consider how much equity they are selling for the amount of investment they are receiving. Most experienced investors would ask for no more than 20-25% of the startup. This is because selling a large chunk of a startup at an early stage would easily demotivate the founders to keep growing their startup. The purpose of most seed stage investors is to test their investment hypothesis, be it on the founding team, the product or the market. Thus, the venture capitalists know not to ask for too much as it would be contradictory to their purpose of investment. From an entrepreneurial perspective, anything more than 20-25% can be giving up too much control of the company. This would not only affect the bargaining power in raising future rounds of financing but also affects the founders’ control over the company, which could hinder the founders from taking the company in the direction they envision.
In the Series Seed term sheet, the aggregate proceeds are as follows:
Aggregate Proceeds: $[_________]in aggregate.
Thus, after calculating the runway and the equity percentage, the startup will set the size of the seed round here.
You can read the entire guide on SEED funding here.
