Investments in companies at the seed stage are normally in unpriced funding rounds. But to understand them, we need to look at priced rounds. First. Priced rounds are typical for a company after early stage investment or seed rounds have finished. They are the conventional way to invest based on the company selling a product or service and earning revenue, profits and cashflow. Agreeing a valuation with investors is easier at this stage as there are numbers to back things up. So with a clear valuation in place, investors purchase shares in the company at a price determined by the valuation, and the transaction is relatively straightforward.

Unpriced rounds can be a little bit more difficult. They are suitable for very early stage investing. The problem we have is that the company barely has a product concept and is unlikely to have revenue, profits, or cash flows. So the startup company can't be given a valuation.

And no valuation means investors are not purchasing a known amount of equity shares. So what can we do? Well instead, investors provide capital now for the purchase of shares in a future priced round. This benefits both parties as the company receives investments at the early stage, and the investor, the VC fund can gain access to early stage companies and then receive its equity stake at a later date. That later date is usually determined by a follow-up funding round, a priced round, or a milestone where a company valuation is easier to determine.