The investment world can be intimidating and downright confusing for a new founder. On the other hand, money is a necessary and scarce resource for almost any new business.
This is why it is important for founders to understand the stages of investing, starting with the first one, pre-seed. Pre-seed investors are the investors who fund a business before it really even has a proof of concept.
There are many different ways how to find pre-seed investors. Below we’ll explain the 101 on pre-seed funding. Keep reading to learn what is pre-seed funding, how to earn it, and more.
What Is Pre-Seed Funding?
Pre-seed funding isn’t arbitrarily named. Think of your business plan as a seed that’s about to lay in the earth to grow. Pre-seed investors fund your business before you’ve really even “planted the seeds” of your company.
Pre-seed funding precedes any other series A, B, or C funding. Unlike traditional funding, pre-seed funding can stem from non-investor resources. The later forms of funding, series A, B, and C, will always come from a venture capitalist or angel investor.
Pre-seed funding is a very formal name. But pre-seed funding can refer to a founder’s own investment in their company. Pre-seed funding can also be investments from friends and family – or it can be crowdfunding.
How to Strike a Pre-Seed Deal?
Here we are going to discuss how to successfully secure pre-seed funding from an investor. It’s surprising at how early-stage some investments begin.
Pre-seed funding is generally under $150,000 and happens within the first 12 months of establishment. Often these startups haven’t even produced their first product.
That said, venture capitalists and investors aren’t going to throw money at the ground.
There are certain qualities pre-seed investors expect in a business. First, investors like proof of traction. This can be traction from a first product. But if you don’t have a product, traction is displayed from landing page metrics, survey results, pre-registrations, and consumer engagement.
The second diagnostic is the team. Solo founders can seek pre-seed funding. Investors will look at the team’s personality and background to justify an investment.
The third-factor pre-seed investors analyze is the business plan. Pre-seed investing is a huge risk for investors as the business hasn’t been around long enough to prove much. This is why they look to the founder’s vision in the business plan.
A founder should be able to clearly communicate the scalability and profitability of their startup.
Do You Need Pre-Seed Investors?
The answer is yes. How much will depend on your business model – but as they say, you need to spend money to make money.
Even the most inexpensive business idea will need funding to get started. This can come from the founder’s savings, family, or even formal pre-seed investors. An accelerator program can help you get that funding, fast.
We are now accepting applications to our pre-seed accelerator. Apply today for consideration by our equity-free pre-seed investors!