What Is Pre-Seed Funding? A Simplified Guide for Startups
The 2010s were a significant era for modern entrepreneurship as the global startup ecosystem experienced massive growth, resulting in its maturing. As a result, seed rounds began requiring substantial investment due to growing competitiveness and heightened funding needs to support startup ideas. This shift led to the creation of a new, earlier-stage funding category specifically designed for smaller businesses. Therefore, pre-seed funding became a solution that allowed aspiring entrepreneurs to secure the earliest investment.
Pre-Seed vs Seed Funding: What’s the Difference?
Pre-seed funding for startups has the primary purpose of raising the necessary capital to run the operations. It is possible to encounter various definitions of this concept, namely friends and family or angel investment, though it is possible to confuse early-stage funding with a seed round or its part. The differences between pre-seed vs. seed funding consider the needs, valuation, and current development stage of a startup. Compared to a seed round, the early stage investments serve to develop a minimum viable product and the company’s foundation.
The Role of Pre-Seed Funding in Startup Growth
Startup founders aim to raise the capital to fulfill their vision by creating a functional product from a prototype or service. Pre-revenue seed funding is an essential step for building a core team while testing startup ideas to achieve the best result. In regard to the pre-seed vs seed funding explanation, this stage predetermines a startup’s success through seizing initial market share, establishing distribution channels, and gaining the first customers. The secured funds, in turn, are necessary to create a startup’s value that will attract seed investors and support the next phase of growth, including product refinement, team expansion, and broader market entry.
What Is Pre-Seed Funding Typically Used For?
Based on the main purpose of pre-seed funding for startups, entrepreneurs have to complete formal requirements while supporting the development process. These actions can be summarized as follows:
- Company and Basic Tech Stack Setup. Pre-seed startup funding provides money to establish essential infrastructure and technology stack.
- Legal Fees and Business Incorporation. Startup founders will pay to incorporate their business, while the initial capital will cover legal costs.
- Early Hires and Talent Acquisition. Pre-seed round funding plays a critical role in assembling the core team to support the startup scaling process.
- Product Development and Prototyping. Professionals use resources to develop an MVP (Minimum Viable Product), test market, and make necessary adjustments.
- Gaining Initial Traction or Market Validation. Pre-seed funding supports early marketing efforts and proves the concept’s viability, which is essential for attracting future rounds of investment.
Therefore, pre-seed funds lay the groundwork for seed funding by proving the concept and attracting early investors.
How Much Pre-Seed Funding Do Startups Usually Raise?
Pre-seed startup funding may involve multiple small rounds, with investments typically starting around $25,000 and reaching up to $2 million, though in rare cases they can go as high as $5 million. The initial capital depends on multiple factors, including industry, product type, team size, and location. It is critical to request the right amount of funding to avoid underinvestment. Additionally, pre-revenue seed funding should provide capital for 12-18 months of runway, covering essential operations.
Real-Life Examples of Pre-Seed Funding Rounds
By showcasing recent successful funding rounds, entrepreneurs can better understand how factors like product prototype, business goals, and market niche influence the amount of capital raised. Pre-seed funding for startups also depends heavily on the startup’s scaling strategy, team strength, and the perceived market opportunity.
Linkup
The featured French startup has successfully secured funding in November 2024. The leading investors, including Seedcamp, Axeleo Capital, and Motier Ventures, helped Linkup to raise about €3 million in pre-seed round funding. The company’s solution is to deliver fast, ethical access to online content for AI systems.
Workflow
This British startup closed a pre-seed funding round at $3 million in mid-November 2024. Investors from the Revolut team, with participation from 8VC, Form Ventures, Kima Ventures, and funds of Sequoia, Octopus, and Index, allowed Workflow to fund its original solutions. This company is a next-gen marketing platform intended to support creative teams in managing design, marketing, and product assets.
Graph Therapeutics
This Austrian techbio startup uses the potential of AI tools to create innovative drugs for inflammation and immunology diseases. Graph Therapeutics secured $3.1 million in pre-seed funding in January 2025. Backed by Squareone and Merantix Capital, with NAVEC Investment, the startup targets an ambitious goal of accelerating the discovery of precise immunotherapies.
How to Raise Pre-Seed Funding for Your Startup
Pre-seed funding for startups can be a challenging process since getting the right investor or strategy to raise money is a highly nuanced task. At the beginning, business owners use their savings and personal connections to source operations. However, reaching angel investors or accelerator programs has become a foremost solution in financing the project. Such a category of pre-seed investors supports the startup at its early stage while offering networking opportunities.
Who Are Pre-Seed Investors?
Pre-seed funding is a high-risk investment that involves backing unproven ideas, early-stage teams, and products that may still be in development. While there are modern alternatives to get funds for startups, traditional pre-seed investors are:
- Startup Accelerators and Incubators
- Angel Investors
- Friends and Family
- Micro VCs
Primary advantages of using the traditional funding options include a less formal approach to negotiations and decision-making. Moreover, investors offer mentorship while providing industry connections necessary for networking and further scaling.
How Much Should You Raise in a Pre-Seed Round?
Investments under $200,000 are necessary to fund a prototyped idea, while funds higher than $500,000 to gain traction and start early sales. Startup owners should consider their chosen niche, industry experience, and business idea when estimating the amount of capital. In turn, the following steps should be:
- Estimate the money necessary to cover a year’s minimum runway.
- Consider a startup’s pre-money valuation.
- Decide how much equity will be given to investors or as compensation for the core team.
It is highly recommended to consult with mentors or early investors to make realistic estimations.
How to Prepare for Raising Pre-Seed Capital
Preparations for raising money are the most complex and time-consuming part. Entrepreneurs should complete and present all necessary information to demonstrate a startup’s credibility and convince investors. These actions include:
- Development of a business plan.
- Estimation of all critical metrics.
- Build a comprehensive pitch deck.
- Incorporate your business.
- Choose the right investor.
Startup owners should also place emphasis on investors’ feedback and adjust the business plan accordingly to increase the chances of success. Follow this guide to get detailed insights and suggestions for preparing your pre-seed funding strategy, pitch materials, and investor outreach plan.
Final Recommendations
To succeed, startup owners should embrace resilience and full-time commitment to their goals since the initial steps in raising money for scaling operations can be frustrating. It is reasonable to admit that investors share their expectations and interests when making their final decision. Moreover, selecting the right investment type will also affect the development of the product, in addition to raising funds in the future. Securing pre-seed funding is about building lasting investor relationships that align with your startup’s vision and long-term growth.
Frequently Asked Questions (FAQ)
Q: What are alternative ways to raise pre-seed funding for a startup?
A: Startups can raise pre-seed funding through angel investors, startup accelerators, crowdfunding platforms, pitch competitions, or by using personal savings and support from friends and family.
Q: How can startups efficiently raise pre-seed funding within a limited period?
A: To raise funds quickly, founders should prepare a clear pitch deck, build a strong MVP, leverage existing networks, target active angel investors, and apply to accelerators with rolling admissions.
Q: What Is Pre-Seed Funding and Why Does It Matter for Startups?
A: Pre-seed funding is the earliest investment stage that helps founders validate their idea, build a prototype, and prepare for market entry.
