At seed stage valuation is more negotiation and market balance than science. What data sets the price and how much dilution should a founder accept?
Valuation in a seed round is what founders agonize over most and decide on the least data. There is no revenue, or very little; when making projections you have a team, a product and a market story. In this article, as a team that reviews more than 1,100 applications a year, we share what we see in this process.
What determines valuation?
At seed stage classic revenue multiple methods do not work. Several factors set the price in the market:
- Market references: Valuations of recent rounds at a similar stage and sector
- Team background: Founders who have started or scaled companies before are valued higher
- Traction: Monthly growth, number of customers, pilot agreements
- Competition: How many investors lined up for the same round?
- Round size: The amount of capital targeted determines the stake the investor takes
Dilution in practice
According to Sarmal data, investors in seed rounds in Türkiye typically take between 12 and 22 percent, averaging 17 percent. When an option pool is added, founders' dilution per round rises to 20–28 percent. As a rule, it is considered healthy for the founding team to hold more than 55–60 percent in total after the first two rounds. You can use our equity dilution calculator to calculate dilution in advance.
Common mistakes
- Chasing the highest valuation: A price inflated enough to cause a down round next time harms the founder more than it helps.
- Forgetting the option pool: Plan a pool of 8–12 percent in the pre-money for critical hires in the first 12–18 months.
- Neglecting the liquidation preference: A 1x non-participating preference is standard; more aggressive terms can wipe out a valuation advantage.
- Not evaluating the investor's contribution: At the same valuation, two different investors provide very different value: network, hiring support, access to the next round.
Preparing for negotiation
Before negotiating, prepare three documents: a clean cap table, an 18-month use-of-funds plan and at least five comparable rounds for benchmarking. Ask the investor for a valuation range, but also defend your own range clearly.
Conclusion
A seed valuation is less a number than a framework that sets the balance between founder and investor over a long road. Your goal is to find a sustainable price that lets you reach a higher valuation in the next round with a strong story.
A worked example
Suppose the pre-money valuation is USD 8 million, the investment USD 1.5 million and the new option pool 10 percent. The post-money valuation is USD 9.5 million and the investor takes a 15.8 percent stake. The combined stake of existing holders falls to 74.2 percent. A founder who held 80 percent before the round ends up with about 59.4 percent. In other words, the apparent “15.8 percent dilution” together with the option pool corresponds to a loss of roughly 26 percent of the stake for the founder.
