Seed & Early-Stage Financing
A seed round is where the story either starts or stalls. I’ve watched founders lose control of their companies before they ever built a product—not because the idea was bad, but because the first financing was structured by someone who didn’t understand what comes next. A poorly drafted convertible note or a SAFE with the wrong valuation cap can quietly rewrite your entire cap table by Series A. By then, the math is already working against you.
At Montague Law, I advise founders and investors on seed-stage financings—from pre-seed friends-and-family rounds through institutional seed and bridge financings. My approach to early-stage deals was shaped by years of venture capital and private equity work at Locke Lord LLP (now Troutman Pepper Locke), an AM Law 200 firm, where I focused on structuring equity investments and negotiating the terms that govern the relationship between founders and capital. I also teach Entrepreneurial Law as a visiting professor at the University of Florida’s College of Business, which means I think about these structures from both sides: the deal that gets done today and the company that has to live with it tomorrow.
I work with clients from our offices in Fernandina Beach and Coral Gables (Miami), Florida, though the practice is national in scope.
What I Handle in Seed & Early-Stage Deals
Structuring the round. Deciding whether a SAFE, convertible note, or priced equity round is the right vehicle isn’t just a legal question—it’s a strategic one. I help founders and investors evaluate the tradeoffs: simplicity versus certainty, dilution math, and downstream implications for Series A terms. Most seed deals today use either the Y Combinator SAFE or a convertible note. I draft, review, and negotiate both.
Cap table modeling and dilution analysis. Before a founder signs anything, I walk through what the cap table looks like after conversion—under different valuation scenarios. My accounting background (Stetson University) makes this second nature. Founders need to understand, in plain numbers, what they’re giving up.
Securities law compliance. Raising capital is a securities transaction, full stop. Even a friends-and-family round needs to comply with federal and state securities laws. I advise on exemptions under Regulation D (Rule 506(b) and 506(c)), state Blue Sky filings, and Form D requirements with the SEC. Getting this wrong doesn’t just create legal risk—it can kill a future fundraise when the Series A investor’s counsel runs diligence.
Investor-side representation. I also represent angel investors, micro-VCs, and family offices investing at the seed stage. Investor-side work at this level includes reviewing deal terms, advising on information rights and pro rata participation, and flagging structural issues that could affect the investment thesis.
Bridge financings and extensions. Not every company raises a clean Series A right on schedule. I handle bridge notes, SAFE extensions, and interim financings designed to give a company runway while it hits the milestones needed to raise a priced round.
The Landscape: What Founders Get Wrong at the Seed Stage
The seed financing market has standardized significantly since Y Combinator introduced the SAFE (Simple Agreement for Future Equity) in 2013. The current post-money SAFE—which Y Combinator updated in 2018—is now the default instrument for most pre-seed and seed deals in the United States. It’s a clean, simple document. That simplicity is its strength and its trap.
The trap is that founders treat SAFEs as informal—a handshake with a document attached. They stack multiple SAFEs at different valuation caps without modeling the dilution. They don’t think about the interaction between the SAFEs and the option pool. They don’t consider what happens when a lead Series A investor demands a full ratchet anti-dilution provision and those SAFEs convert into a cap table that nobody anticipated.
Convertible notes present their own complexity: interest accrual, maturity dates, and conversion mechanics that can vary significantly depending on the form used. The National Venture Capital Association (NVCA) publishes model legal documents for venture financings—including term sheets and note purchase agreements—that represent industry-standard terms. I use these as a baseline and negotiate from there.
On the regulatory side, the SEC’s framework for private placements under Regulation D remains the primary pathway for seed financings. The distinction between Rule 506(b) (no general solicitation, up to 35 non-accredited investors) and Rule 506(c) (general solicitation permitted, accredited investors only with verification) has meaningful implications for how a founder approaches their raise. State Blue Sky laws add another layer, though federal preemption under the National Securities Markets Improvement Act of 1996 (NSMIA) covers most Reg D offerings.
These aren’t theoretical issues. They’re the details that surface during Series A diligence—and if they weren’t handled correctly at the seed stage, they become expensive to fix and embarrassing to explain.
Frequently Asked Questions
What is a SAFE and how is it different from a convertible note?
A SAFE (Simple Agreement for Future Equity) is an investment instrument created by Y Combinator that gives an investor the right to receive equity in a future priced round. Unlike a convertible note, a SAFE is not a debt instrument—it has no interest rate and no maturity date. This makes SAFEs simpler and faster to execute, but it also means the investor has no debt claim if the company fails before a conversion event. Convertible notes, by contrast, accrue interest and have a maturity date, which can create pressure (or leverage) to either convert or repay. The right choice depends on the dynamics of the specific deal.
When should a startup hire a lawyer for a seed round?
Before you sign anything. I’ve seen founders execute SAFEs downloaded from the internet without understanding the valuation cap mechanics, only to discover at Series A that they’d given away far more equity than they intended. Engaging counsel early—ideally before you set the terms—lets you model the dilution, ensure securities law compliance, and avoid structural issues that are expensive to fix later. The legal cost at the seed stage is modest compared to the cost of unwinding a badly structured round.
Does Montague Law represent both founders and investors in seed deals?
Yes. John Montague represents both founders raising capital and investors deploying it. However, I cannot represent both sides in the same transaction—that would be a conflict of interest. My experience on both sides of the table means I understand the priorities and concerns of each party, which leads to more efficient negotiations and better-structured deals.
How much does it cost to have a lawyer handle a seed round?
Seed financings using a standard SAFE or convertible note are typically among the most cost-efficient venture capital engagements. The scope depends on complexity: a single SAFE with one investor is straightforward; a round with multiple investors at different caps, with side letters, costs more. I provide transparent fee estimates before starting any engagement. For founders with budget constraints, I’m direct about what work is essential and what can wait.
What is Regulation D and why does it matter for my seed round?
Regulation D is a set of SEC rules that provides exemptions from the registration requirements of the Securities Act of 1933. Most seed rounds rely on Rule 506(b) or Rule 506(c) to legally sell equity (or SAFEs/notes, which are securities) to investors without a full SEC registration. Failing to comply with Reg D—for example, by publicly soliciting investments under 506(b), or by not verifying accredited investor status under 506(c)—can create serious legal exposure and will almost certainly be flagged during Series A due diligence.
About John Montague
John Montague is a venture capital, M&A, and technology transactions attorney with over a decade of experience. He earned his J.D. from the University of Florida’s Fredric G. Levin College of Law and holds an accounting degree from Stetson University. John serves as a visiting professor of Entrepreneurial Law at the University of Florida’s College of Business. Prior to founding Montague Law, John structured venture capital, M&A, and private equity transactions at Locke Lord LLP (now Troutman Pepper Locke), an AM Law 200 firm. He advises founders, investors, and businesses from offices in Fernandina Beach and Coral Gables (Miami), Florida.
Contact: 904-234-5653 | Schedule a Consultation