A priced round is a fundraising event where a company sells newly created preferred stock at a fixed price per share, which sets a formal valuation for the business. Unlike SAFEs and convertible notes, which defer valuation to a later date, a priced round sets definitive terms including pre-money valuation, share price, liquidation preference, board composition, and protective provisions. Series A is typically the first priced round for most startups.
A priced round establishes an official valuation and creates a new class of preferred stock. It takes more work than SAFEs or convertible notes, but it gives every party more structure and legal clarity going forward.
Series A is typically the first priced round for most startups. Some companies do a priced seed round instead, but SAFEs still dominate pre-seed and seed-stage fundraising.
The company and its lead investor negotiate a pre-money valuation, and new preferred shares are created and sold at a price per share based on that number. All outstanding SAFEs and convertible notes from earlier rounds then convert into equity at this point, based on their own cap and discount terms.
The round comes with a term sheet and a full set of legal documents, including a stock purchase agreement, an investor rights agreement, and a voting agreement, and it typically brings board changes along with it.
Say a startup raises $5 million in a Series A at a $20 million pre-money valuation, for a $25 million post-money valuation. The lead investor buys new preferred shares priced off that valuation, and any outstanding SAFEs or convertible notes from the seed round convert into the same round based on their own cap and discount terms, often at an effectively lower price than the new lead investor pays.
SAFEs and convertible notes are fast and cheap, often costing $0 to $5,000 in legal fees, with minimal negotiation, which makes them a good fit for early-stage rounds. A priced round takes longer, typically 4 to 8 weeks, and costs more, often $15,000 to $50,000 in legal fees, because it involves thorough negotiation and is appropriate once you are raising $2 million or more, setting formal governance, and bringing on institutional investors.
Not budgeting for legal costs is a common surprise, since both sides retain lawyers and the company typically covers investor counsel too. Rushing the process is another risk: priced rounds involve real governance changes, so make sure you understand exactly what you are signing.
Not modeling how SAFEs and notes convert is perhaps the most common mistake of all. The actual dilution often surprises founders who never maintained an up-to-date pro forma cap table.
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