Seed Extension Rounds: Why are they popular, and how do you raise one?

If you’re a startup founder, you know that fundraising has been more difficult over the last twelve months than in prior years. Seed extension rounds have become a hot topic in this challenging fundraising climate. You may also have heard of a seed extension round via one of its other names — Seed+, Seed to A, Pre-Series A round.

Extension rounds (sometimes known as bridge rounds) are typically raised to secure additional capital when you need more runway to achieve certain milestones or meet the criteria for the next funding stage. Some rounds do see an increase in valuation but are not necessarily fully-fledged Series A rounds. In other cases, a startup reopens the previous rounds to take in additional capital at a flat valuation. Occasionally there are extension rounds that are down rounds (done at a lower valuation), but those are less common if the company is progressing against milestones and performing well.

So why are extension rounds popular right now and often a good plan for a company?

• Shifting metrics for Series A: Metrics investors want to see to raise a Series A have changed, so you need more capital to hit those than you initially raised. For example, while investors previously hoped to see $1M in ARR to clear a Series A, we’re seeing that benchmark closer to $1.5M in ARR with 15% month-over-month growth.
• Need for extended runway: Quite simply, you may need the cash to extend your runway to hit metrics that will allow you to raise a true Series A
• Market uncertainty: Economic uncertainties, market fluctuations, and unforeseen challenges can affect startups’ fundraising efforts. Seed extension rounds offer a way for companies to adapt to changing market conditions, weather potential downturns, and ensure a steady flow of capital to sustain operations and fuel growth.

Tips on Raising a Seed Extension

Quantify Your Progress

Quantify the progress that you’ve made since you closed your last round specifically (not just since you started the company). This means that you’re highlighting key metrics like user acquisition, revenue figures, or any other relevant achievements that demonstrate momentum and potential. A reminder not to hide your metrics even if they’re not where you want them to be! If core revenue metrics have stayed relatively flat, what other data, partnerships or milestones can you point to in order to show progress?

Lean into the Narrative -

Storytelling is a huge part of any fundraise, but it’s extra important to really nail your big-picture narrative when raising an extension. In these bridge or extension scenarios, investors often ask themselves, “this is a bridge to what?” Communicate where this new tranche of money gets you — qualitatively and quantitatively. Explain how the additional capital will enable the startup to reach significant milestones, capture market opportunities, or scale operations with as specific of metrics as possible. Preview too what your plan for Series A raise will be after that to paint the complete picture.

Run a Process -

As with any fundraise, we recommend that you run a thoughtful and tight time-bound fundraising process when you’re raising a seed extension round. In this case, here’s a six-step framework that you can follow:

1. Start with existing investors to drum up support for this extension and find out if they have the capacity to invest an additional amount and make introductions.
2. After you have clarity on existing investor participation and a commitment number circled, we recommend you create a short list of investors who may have been a fit for your original seed round.
3. Create a short list of Series A investors who might be interested in writing a smaller check a bit early for them (Early Series A, Late Seed Investors).
4. Create unimpeachable, buttoned-up materials. Prepare a strong pitch deck and compelling data room that clearly highlight your company’s progress, growth potential, and the investment opportunity the seed extension round presents. As mentioned above, be sure to showcase the achievements and milestones you’ve reached since the last round, and articulate the specific goals and objectives the additional funding will enable you to accomplish.
5. Coordinate investor outreach. Determine what introductions your current investors will make, and who you’ll be reaching out to directly. We recommend all the intros for round one go out on the same 1–2 days. Try for a first set of conversations, then layer on a second wave as needed, etc. Trying to parallel-track conversations may give you some leverage and momentum as you secure commitments.
6. Remain curious and receptive to feedback — if it’s a no, try to gather data points on what metrics investors hope to see and see if there is a learning there.

Most importantly, keep going and stay encouraged. We have seen and been a part of numerous extension rounds over the last 12 months and believe it can done effectively and efficiently to allow great companies to keep building.

If you’d like to chat with us, we host weekly office hours with each member of our team, bookable on our website.