What is pre-seed funding?
Pre-seed funding is the basic fundraising step for a start-up to start. This step is for the founder to make arrangements to initiate work operations. Pre-seed funding is technically not considered funding round as only a small initial amount is generated. Generally, an initial amount between $10k and $250k is raised with this. Pre-seed funding is to have enough investment to launch the start-up and run the initial setup. The funds from pre-seed are responsible for taking the setup to the next level of funding.
This first instance of fundraising for a start-up can be availed from family and friends too. The family and friends are approached when angels and venture capitalists do not fund the start-up.
The three ways to get pre-seed funding are –
- The right investors – The foremost step of raising pre-seed funding is to approach the right investors. At this stage, investors leap of faith as they should invest money into your business or not. The key to target investors is to approach the ones that are interested in funding start-ups. Rather than sales revenue and figure, the investors need to decide based on conviction and future potential.
Create a list of possible investors and contact them. Make sure you have guidance of experienced business consultants that will assist in how to generate money for your startup. Investors need to be impressed as they investment in different startups via seed funding or let’s say SPAC investment. You must have a clear vision to succeed in this.
- Attract them – For securing funding, you may need to attract sales and traction. To convince investors to embrace a personality that impact. 90% of the investors fall for the founder’s personality traits. A founder who can build a dynamic team and can lead the team well is the one who can pitch the investors as well. An impressive background in the field can also encourage investors to take you seriously.=
- Pre-seed funding pitch – Once you capture the interest of your investors, the next step is to pitch. Give a brief detailed introduction of the vision, goals, products and services, business model, key milestones planned, and the revenue generation system of the company.
Angel investors – These are individuals who invest their relatively small personal investment in start-ups. Angel investors are individuals with high net worth and are the sole decision-makers. The sweet spot that angles invest is in 1-3 years of the start-ups.
Accelerator or incubator programs – accelerator or incubator programs are start-up crash courses to help them attain success. These programs involve all stages of development, from the early stage to the last stage. They also provide mentorship, advice, investment pitches and resources to help a start-up succeed.
Pre-seed and seed investment venture capital funds – These are multiple limited partner investors that can offer larger investments. Venture capital funds seek private equity stakes in start-ups through pooled investment funds. They are high risk or high return opportunities for start-up companies.
A start-up needs financial power to flame its ideas!
The expectations of the investors are growing. To buckle up, the start-ups need a more engaging and effective pitch deck. For a successful start-up, the founders need to be aware of investor trends and pitch accordingly.
Pre-seed funding is a start-up investment needed to start any business. A pre-seed capital or pre-seed money is used for product development. An investor may invest in your company in return for equity in the company.