State of Pre-Seed: Q1 2025
State of Pre-Seed: Q1 2025
Author: Hamza Shad
Read time: 2 minutes
Published date: May 20, 2025
Data from more than 5,000 convertible instruments raised in the first quarter, and more than 110,000 instruments raised since 2020, reveals major pre-seed trends on dilution, discount percentages, industry comparisons, and more.
The pre-seed funding landscape has clearly evolved over the past few years. Similar to priced equity rounds, there has been a reduction in the overall number of deals and cash raised at the pre-priced stage.
In Q1 2025, pre-seed startups in the United States that use Carta raised a total of $737 million across 5,119 convertible instruments, a notable reduction from Q4 2024’s $923 million across 6,251 instruments. Pre-seed funding in Q1 2025 also lagged behind Q1 2024 by both metrics.
Smaller rounds continue to make up a larger percentage of all pre-seed rounds. Q1 2024 had nearly 3,800 rounds under $1 million and 2,900 above $1 million, while Q1 2025 had 3,400 under $1 million and only 1,700 above $1 million. This illustrates that the decline in pre-seed investment is largely the result of fewer large deals being signed.
On the other hand, Carta data shows that valuation caps have risen for both SAFEs and convertible notes at most round sizes. The pre-seed startups that are raising under the current environment aren’t getting larger check sizes than their predecessors, but they are gaining more favorable valuation caps.
SAFEs continue to be the preferred pre-priced instrument over convertible notes across industries, even in biotech/pharma and medical devices, which used to lean more towards the use of convertible notes. The rest of this report dives into major pre-seed trends, including dilution, discount percentages, industry comparisons, and more.
Q1 2025 highlights
- Continued decline in pre-seed activity: For the third consecutive quarter, pre-seed investment declined, in terms of both total cash raised and count of instruments. Q1 saw a total of $737 million invested, down 20% from Q4’s $923 million.
- Pre-seed hubs in the South: Out of the top 20 pre-seed metros by total cash raised in the past year, six were in the South: Austin, Dallas, Houston, DC, Atlanta, and Miami. The South took in 18% of all pre-seed cash raised from Q1 2023 to Q1 2025.
- SAFEs vs. convertible notes: SAFEs comprised a record high of 90% of all pre-seed rounds on Carta in Q1 2025, while convertible notes made up the other 10%. The share of pre-seed capital raised on SAFEs, though, fell slightly to 82%, suggesting that Q1 had some large convertible note deals.
- Increasing valuation caps: For post-money SAFE rounds above $500,000, valuation caps rose slightly in Q1 2025 compared to Q4 2024.
- Steady interest rates: The median interest rate on convertible notes held steady at 7% in Q1 2025, down from a high of 8% in Q2 2024.
- Industry dynamics: Startups in crypto, biotech/pharma, and hardware had the highest valuation caps in SAFE rounds. Hardware startups also raised the third highest amount of cash in Q1, behind only SaaS and healthtech.
Key trends
Full report available: Start reading now for free
Our complete State of Pre-Seed Q1 2025 report includes 30 additional charts and analysis on SAFEs, convertible notes, dilution, discount percentages, and specific industries.
Author: Hamza Shad
Hamza Shad is an insights manager at Carta, where he analyzes data on the VC and startup ecosystem. Previously, he conducted research on entrepreneurship in emerging markets at Endeavor.