Pre-Seed
Pre-Seed: How to Raise Capital, What Investors Look For, and How Founders Win
June 2025
Stage: Concept-to-Prototype Funding with Early Risk Capital The Pre-Seed Round exists to help startups transition from a promising idea to a functional prototype. This round typically takes place when a founding team has a clear problem-solution hypothesis but has yet to prove product-market fit or generate reliable revenue. At this stage, the startup may be pre-product, pre-revenue, or in a very early beta phase. Investors in the Pre-Seed round are often emerging fund managers, sector-specific micro-VCs, accelerator programs, or experienced angels willing to take on extreme early risk. This capital helps the company build an MVP, test core assumptions, validate basic user behavior, and begin assembling its founding team. Capital Structure: SAFEs with Caps, Convertible Notes, or Accelerator Equity Most Pre-Seed deals are structured using SAFEs or convertible notes, sometimes with valuation caps to reward early believers. Total raise size can vary from $250,000 to $1 million, often spread across multiple smaller investors or funds with a high-risk appetite. Institutional funds participating at this stage often brand themselves as “pre-seed specialists” and may take a lead role with soft influence over the roadmap. Some deals involve accelerator equity in exchange for capital and mentorship. Because cap tables are still forming, this is a critical time for founders to avoid over-dilution or overly complex terms. The round may or may not have a lead investor, but decisions made here set the tone for future governance, valuation discipline, and equity management. Strategic Purpose: Traction Milestones & Signal for Seed Readiness The Pre-Seed is more than a first bet—it’s the foundation layer of a startup’s fundraising story. When used wisely, the capital raised in this round funds the most vital early proofs: that users will engage, that a team can execute, and that a market exists for what’s being built. It’s also a time when founders must begin treating the company like a company: setting up financial systems, tracking KPIs, and establishing early investor communication habits. Strong execution here can unlock access to top-tier Seed investors, especially if the startup shows velocity in product development or signs of organic demand. Founders must use this round to prove not just vision, but momentum.
When & Why Do Startups Raise at the Pre-Seed Stage?
Pre-Seed rounds are raised when startups have moved past concept validation but still lack the traction required for a true Seed round. Founders raise at this stage to turn a prototype into a working MVP, onboard pilot customers, or prove early growth hypotheses. Capital is typically used for product development, hiring the first technical or business hire, and launching initial go-to-market efforts. Pre-seed investors include early-stage micro-VCs, angel syndicates, or accelerators who are comfortable betting on teams with strong potential but minimal proof. Startups pursue this round when they've exhausted personal networks but have compelling insight into a problem space. Raising pre-seed allows them to operationalize their vision, gather real user feedback, and build early metrics that validate investor interest down the line. Timing is key—raising too early risks dilution without traction, while waiting too long might mean missing the window to iterate quickly before market conditions or competitors change.
What Do Investors Look for at the Pre-Seed Stage?
At the Pre-Seed stage, investors look for a powerful founding insight, evidence of speed, and early customer validation—even if informal. A rough MVP, a landing page with signups, or interviews with target customers can go a long way. Pre-seed investors want to see that the team is resourceful, deeply connected to the problem, and capable of building quickly. They also assess the market size and potential exit pathways, even if the financial model is early. Domain expertise and urgency matter.
Typical Pre-Seed Round Sizes, Valuations & Deal Terms
Pre-Seed Rounds typically raise $250K to $1M, often with valuations between $2M and $8M. SAFEs and convertible notes are the most common instruments, offering cap-and-discount structures. Some early pre-seed funds or accelerators might offer standardized terms, like $125K for 7%. Institutional investors, if involved, may request light governance clauses like information rights or MFN provisions, though priced rounds are increasingly common in mature markets. This highlights the importance of this stage in setting the tone for future financing and investor expectations.
Who Invests in Pre-Seed Rounds?
Pre-Seed rounds attract a mix of individual angels, micro-VCs, early-stage accelerators, and increasingly, operator-led funds. Investors are willing to bet on pre-revenue companies with unproven business models, so they focus heavily on founder quality, market insight, and vision. Typical players include Hustle Fund, Antler, Pioneer, and angels active in early ecosystems. Syndicates and rolling funds (e.g., via AngelList) also play a growing role at this stage. This underscores the critical role these investors play at this stage, offering not just capital but also confidence, network support, and early validation crucial to the startup’s trajectory.
How to Craft a Winning Pre-Seed Round Narrative
At Pre-Seed, youre selling your vision, your ability to execute, and your understanding of the market. Investors expect clarity of thought, early validation, and the capacity to build fast with few resources. Emphasize your experiments, learnings, and team strength. Tell a focused story about what you've tried, what you've learned, and what you're doubling down on. Investors want to see founder obsession, asymmetric insight, and grit. TAM matters less than traction. Explain how the money will let you hit key product, user, or signal-based milestones in 612 months.
Red Flags That Kill Pre-Seed Deals
Investors walk away when founders haven't rigorously stress-tested core hypotheses. Absence of substantive user interviews, a non-existent or utterly crude Minimum Viable Product (MVP), or superficial customer insights prove inadequate foundational work. Solo founders lacking critical execution skills (especially technical) or founding teams with glaring competency gaps highlight severe execution risk. Constantly pivoting the core idea without evidence, chasing buzzwords without substance, or dismissing actionable feedback breeds deep mistrust. Vague financial projections, undefined product roadmaps, or missing concrete 12-month operational and financial milestones scream unpreparedness for structured capital. This stage demands evidence of founder-market fit through direct engagement and scrappy validation, not just theoretical brilliance; failing to demonstrate this hands-on learning and adaptation guarantees collapse.
How to Prepare for a Pre-Seed Round (Checklist + Resources)
Pre-seed is where noise becomes signal. No one expects polish—but they do expect motion. Your prep should center on what you’ve learned: where the market is broken, what your insight is, and how you’re going to move fast. Your deck should showcase asymmetric understanding, velocity, and a believable 12-month roadmap. If you’ve built something, demo it. If not, narrate your plan with conviction. Highlight customer conversations, UX prototypes, or sharp thesis docs. Checklist: MVP or interactive Figma, traction memo, hiring plan, clean cap table. Tools: Notion, OpenVC, F6S, founder dashboards. Resources: Signal, YC startup templates, and operator blog posts. Share weekly updates to create ambient confidence. Pre-seed investors back momentum, not metrics. They’re betting that you know something others don’t—and that you’ll move fast enough to prove it. Forget polish—build heat, insight, and relentless motion.
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