Raising seed funding marks the moment when a young company turns from an early experiment to a genuine commercial venture. Friends and family money and pre-seed cash have helped you prove an idea, but seed capital is what lets you build the first real team and launch at pace. Investors are now investing larger amounts, asking tougher questions, and expecting proper legal foundations. The guide below explains what seed funding looks like, which businesses tend to pursue it, and the legal housekeeping you should address before opening a round.
What is seed funding?
Seed funding is the first significant institutional or professionally led equity investment in a startup. Ticket sizes vary, but in the UK a typical seed round sits somewhere between £500,000 and £2 million. Capital often arrives from a syndicate of angel investors, an early-stage venture capital fund, or a seed-focused fund that takes the lead and organises the rest of the syndicate. In return, the new investors acquire a material minority stake (usually 10-25 per cent of the company) together with contractual rights that protect their position while allowing founders to keep day-to-day control.
Seed money pays for building a full minimum viable product (if you have only a prototype), expanding the team beyond the founder group, running marketing experiments, and refining business processes. While pre-seed cash tends to cover research and proof-of-concept work, seed funding is meant to demonstrate repeatable, scalable growth before the company moves on to a Series A Funding Round.
Who usually raises a seed round?
A company is considered “seed-ready” when it can point to a working version of its product that solves a real problem for a clear group of users. Early testers or paying customers have tried the product, offered feedback and come back for more. That repeat engagement shows there is genuine demand, not just curiosity.
Revenue may still be modest, but there should be a line of sight to meaningful growth. Typical signs include a growing wait list, month-on-month uptake, or letters of intent from larger clients. Founders will also have lined up the first key hires such as an additional engineer, a sales lead or a regulatory specialist. This shows the business can scale quickly once money lands in the bank.
Investors will also expect basic commercial infrastructure and a go-to-market strategy. Financial records must show how previous funds were spent and how far they stretched and a product roadmap should map cash needs to identifiable milestones such as feature releases or geographic roll-outs.
What are the key legal considerations during seed funding?
Before investing, most seed-stage investors will ask to see evidence that your legal setup is in good shape. They want to know there are no hidden problems with your company’s structure, paperwork, or ownership. Below are the areas that typically come under scrutiny during this stage of funding.
Board and shareholder approvals
To raise investment, your company needs formal approval from both the directors and the shareholders. This usually involves passing a resolution that gives the directors permission to issue new shares to the investors. The existing shareholders will probably also need to waive their “pre-emption rights,” which is the right of existing shareholders to buy new shares first to maintain their percentage ownership of the company. If you’re classes of shares that give investors special rights or setting up founder share vesting, you’ll likely need to update your company’s articles of association.
Clean Cap table
A “cap table” is just a spreadsheet that shows who owns shares in your company. A clean cap table means that everyone’s ownership is clearly documented and that any past share transfers have been properly recorded.
Intellectual property ownership
If your product includes software, designs, branding or written content created by founders or freelancers, the legal rights to that work (known as intellectual property or IP) need to be owned by the company and not by the individuals who created them. Any IP created before the company was set up should be formally transferred using a legal document called an assignment deed. Employment or consultancy contracts should also include wording to make sure anything created in future automatically belongs to the company.
Regulatory and data protection compliance
If your business collects or uses personal data such as customer names, emails or payment details, you need to follow GDPR data protection laws. This means having a clear privacy notice, keeping records of what data you collect and why, and putting proper safeguards in place. If you operate in a regulated sector such as financial services (FCA), healthcare (MHRA), or care provision (CQC), you may need specific approvals or licences.
SEIS/EIS tax relief
To encourage investment into early-stage companies, the government offers tax relief to qualifying investors under the SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme). To access these benefits, your company needs to apply for “advance assurance” from HMRC before the funding round, and your share structure must meet certain rules. For example, not offering investors any right to get their money back ahead of others. Most angel investors will expect these schemes to be in place before they commit.
Working with professional advisers
Seed rounds involve accountants, tax advisers, lawyers, often a lead investor’s counsel and sometimes regulatory consultants. Coordinating multiple advisers can be taxing if you have never raised institutional money before. A law firm that specialises in early-stage deals will project manage its part of the process, liaise with the other advisers and keep the timetable realistic. You remain free to run the business rather than acting as an unpaid paralegal.
JPP Law works with startups and growth companies every week, so we know how to organise a seed round efficiently. You deal directly with senior solicitors who have closed dozens of seed and Series A rounds, not juniors learning on your time.
We also speak plain English. When a clause must stay for investor tax relief or regulatory compliance, we explain why. When a request is negotiable, we tell you and suggest market-standard compromises. Investors appreciate that clarity and deals close faster when both sides trust the paperwork.
Because seed funding sets the tone for future rounds, we draft with scale in mind so that your agreement may last several rounds of investment depending on the requirements of your future investors.
Need expert guidance for your seed raise?
If seed funding is on your horizon, an initial half-hour call with a JPP Law solicitor will highlight any gaps in your legal housekeeping and outline a practical schedule for addressing them. We can review your draft term sheet, help you assess SEIS/EIS eligibility and prepare the board and shareholder resolutions needed to streamline completion. Get in touch to book a free consultation.
You may also be interested in:
The First Four Stages of Funding Rounds: What You Need to Know
Legal Preparation for Pre-Seed Funding
Legal Preparation for Series A Funding
Legal Preparation for Series B Funding
Startup Funding Rounds – Advice and Preparation
Advanced Subscription Agreements: A Tool for Managing Valuation Uncertainty
Convertible Loan Notes: The pros and cons when it comes to raising business finance
Crowdfunding Opportunities for Startups and Scaleups in the UK
UK Startup Funding Options and the Associated Legal Considerations
The Pros and Cons of Venture Capital Funding
Peer-to-Peer Lending: Advantages and Disadvantages
Funding alone is not always enough to ensure startups thrive
