Founders
Startups
Fundraising
Sep 26, 2025
What is Pre Seed Funding?
Raising money is one of the most important and stressful milestones in a founder’s journey. Before seed rounds and Series A, most startups start with pre seed funding, the earliest, riskiest stage of venture investment.
At this stage, founders usually don’t have a fully functional product, revenue, or customers. Instead, pre seed helps transform a raw idea into a real company. For early-stage founders, understanding pre seed fundraising is critical: it sets the tone for future investors, valuation, and dilution.
This guide explains what pre seed funding is, who the investors are, how to raise it, and what it’s typically used for with practical examples along the way.
What is Pre-Seed Funding Used For?
The main purpose of pre seed is to bridge the gap between idea and execution. Here’s how startups typically use this capital:
1. Building the MVP
Most pre seed capital goes into developing a minimum viable product (MVP). For example, Airbnb’s early pre seed money was used to build a basic website where hosts could list their homes. This version was far from the polished platform we know today, but it was enough to test demand.
2. Hiring the First Team Members
Founders often use pre seed money to bring on technical co-founders, engineers, or growth leads. For instance, Canva’s founders raised early money to hire engineers who could transform their design vision into a scalable tool.
3. Market Validation
Funds help run pilots, test customer demand, and validate assumptions. A D2C startup might use pre seed money to run small ad campaigns and track conversions before committing to large-scale marketing.
4. Legal & Administrative Costs
Incorporation, cap table setup, intellectual property filings, and compliance all cost money. Even simple steps, like incorporating in Delaware or setting up ESOPs, can cost thousands of dollars.
5. Early Marketing & Branding
Establishing a brand identity, launching a website, or running early campaigns is common at this stage. For example, Notion used its early funding to create explainer videos and onboarding flows that built community interest even before the product was mainstream.
How to Get Pre Seed Funding
Securing pre seed isn’t just about asking investors for money, it’s about showing clarity, potential, and momentum.
Step 1: Build a Strong Foundation
Define the problem and solution clearly.
Show evidence of demand, like a waitlist with hundreds of signups. Many YC startups have been accepted on the strength of a simple landing page and traction from early users.
Highlight founder-market fit, such as prior experience in the same industry.
Step 2: Prepare Pitch Materials
Pitch Deck: Tell a story about the vision, market, traction, and financials. An effective deck highlights “why now”, e.g., how AI or regulation shifts create a unique timing advantage.
Data Room: Include supporting files like cap table, product roadmap, GTM strategy, and legal docs.
Demo or Prototype: Even a clickable Figma prototype can give investors confidence that the idea is executable.
Step 3: Network & Outreach
Warm introductions through mentors, accelerators, or past colleagues are often more effective than cold outreach. For example, many angel investors in India prefer referrals through other founders they already back.
Cold outreach still works if personalized and concise. A strong cold email might highlight traction (“500 signups in 30 days”) and request a short call.
Joining accelerators and incubators not only gives funding but also credibility and access to investor networks.
Step 4: Closing the Round
Use simple instruments like SAFE notes (popularized by Y Combinator). These avoid complicated negotiations over valuation.
Avoid over-optimizing valuation; raising at $5M vs $3M may not matter much, but bringing the right investor onboard can be critical.
Hire a startup lawyer or use trusted templates like YC’s SAFE agreements.
Types of Pre Seed Investors
Not all pre seed money comes from the same place. Founders should understand their options and trade-offs.
1. Angel Investors
Who they are: Wealthy individuals investing their personal capital. Angels often write checks between $10K–$250K.
Pros:
Flexible and quick decision-making.
Often bring domain expertise and networks.
Cons:
Limited ability to invest in later rounds.
May not have structured due diligence.
Example: Jeff Bezos invested $250K in Google’s early round as an angel, which later became worth billions.
2. Micro-VC Funds
Who they are: Smaller venture capital firms, often managing $10M–$50M funds, specializing in early-stage checks.
Pros:
More professional due diligence and structured process.
Ability to lead small rounds and provide follow-on capital.
Cons:
Slower decision-making compared to angels.
May seek more control (board seats, rights).
Example: First Round Capital is known for backing companies like Uber and Square at very early stages.
3. Accelerators & Incubators
Who they are: Programs that invest small amounts of capital ($100K–$150K) in exchange for equity (typically 5–7%), while also providing mentorship, community, and investor introductions.
Pros:
Access to networks and alumni communities.
Validation and credibility when pitching future investors.
Cons:
Dilution for relatively small checks.
Highly competitive acceptance.
Example: Y Combinator (YC) has funded companies like Airbnb, Stripe, and Dropbox at the pre seed stage. Techstars has backed 3,000+ startups globally.
4. Friends & Family
Who they are: Close contacts who invest based on trust rather than traction.
Pros:
Fastest source of capital.
Often very flexible terms.
Cons:
Emotional risk if the business fails.
Can complicate personal relationships.
Example: Many successful startups, including Dell and WhatsApp, relied on friends-and-family money in their earliest days.
5. Crowdfunding Platforms
Who they are: Online equity crowdfunding platforms (Republic, SeedInvest, Wefunder) that allow retail investors to back startups.
Pros:
Democratizes access to capital.
Useful for community-driven startups.
Cons:
Regulatory and compliance burden.
May not attract institutional investors later.
Example: BrewDog, a craft beer company, famously raised millions through equity crowdfunding, creating thousands of small investors who also became loyal customers.
What is Pre-Seed Funding?
Pre seed is the very first structured capital a startup raises, often before revenue or product-market fit.
Definition
Usually $100K–$1M in funding.
Structured via equity, SAFE, or convertible notes.
Comparison with Other Rounds
Pre Seed: validates idea, builds MVP. Example: a fintech founder raising $500K to develop a payments app prototype.
Seed: grows traction and hires a core team. Example: OpenSea raised a $2M seed round before becoming the world’s largest NFT marketplace.
Series A: scales product and revenue. Example: Figma’s Series A in 2013 funded its move from beta to growth.
Typical Valuations & Dilution
Pre seed valuations range from $1M–$5M depending on region and sector.
Founders give up 5–15% equity.
Silicon Valley averages are higher than Europe or Asia. For example, a SaaS startup in California may raise $750K at a $4M valuation, while a similar startup in Southeast Asia may raise $250K at a $2M valuation.
Preparing for Pre Seed
If you’re gearing up for a pre seed raise, you’ll need more than a pitch deck. Investors expect secure, professional deal rooms.
With Plox, you can:
Securely share your deck with dynamic NDAs.
Track which investors spend the most time on which slides.
Revoke or expire access anytime.
Auto-generate AI investor summaries to know who’s most engaged.
Start free with Plox and stay deal-ready from day one.
Conclusion
Pre seed funding is the launchpad for most startups. It’s where ideas turn into prototypes, and vision turns into reality. Founders who succeed at this stage don’t just have a great idea, they prepare the right materials, target the right investors, and use capital wisely. By understanding what pre seed is, who invests, and how to approach the process, you’ll set yourself up for a smoother seed and Series A journey.
And with tools like Plox, founders can run smarter fundraising processes, with security, analytics, and AI-driven insights that make every round more efficient.
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