Pre-seed funding refers to the money that's raised by a startup before they've even launched their product or service. This type of financing usually covers the costs associated with developing and launching a new product or service, such as market research, prototyping, and hiring initial staff members. If you have a business idea, you are probably wondering how to get pre seed funding.
There are different types of pre-seed funding available depending on your needs and goals. Debt financing involves borrowing money from lenders like banks or credit unions in order to fund your startup expenses. Equity financing entails selling shares in your company in exchange for investment capital from individuals or institutions.
The latest trend in startup investment is crowdfunding which allows businesses to raise small amounts of money from large numbers of people through platforms like Kickstarter or Indiegogo.
Let's break down what is seed funding and how to get pre seed funding for your startup.
What is Pre-Seed Funding?
Pre-seed funding is the first round of funding that a startup company raises in order to get a product off the ground. This type of funding is typically used to pay for things like business formation expenses, initial product development, and market research.
Pre-seed funding can come from a variety of sources, including family and friends, angel investors, and incubators.
There are many types of pre-seed funding and each has its own advantages and disadvantages.
The most common types of pre-seed funding are grants, equity financing, and debt financing.
If you can find a grant that suits your needs, they are a great option as they don't have to be repaid. However, they can be difficult to find and are often highly competitive.
Equity financing is another popular option for pre-seed funding. This type of financing involves selling a portion of your company to investors in exchange for funding.
Debt financing is another option for pre-seed funding. This type of financing involves borrowing money from investors and then repaying them with interest.
How to Get Pre Seed Funding
Pre-seed funding is a great way to get your startup off the ground.
The first step is to put together a strong team. This team should include people with a variety of skills, including business, marketing, and technical skills. You’ll need this team to help you with putting together a business plan and developing your product.
The next step is to develop a prototype of your product. This prototype will be used to pitch your idea to potential investors. It’s important to make sure that your prototype is high quality and properly represents your product.
Once you have a prototype, you’ll need to start pitching your idea to potential investors. This can be done through online platforms, such as AngelList, or through in-person pitch events.
It’s important to remember that not every investor will be interested in your product. But if you keep pitching, you’ll eventually find someone who is willing to invest in your startup.
Getting started with pre-seed funding can be a challenge. But if you have a great team and a strong product, you’ll be well on your way to success.
Key Takeaway: There are many types of pre-seed funding, each with its own advantages and disadvantages.
When to Start Raising Pre-Seed Funding
The process of how to get pre-seed funding also involves knowing when to start raising money. Pre-seed funding is typically sought after by businesses that have a minimum viable product (MVP) but need help to take their product to the next level.
A startup business typically goes through three stages.
The first stage is the idea stage. This is when a business is in its infancy and is focused on developing its product.
The second stage is the traction stage. This is when a business has an MVP and is starting to gain traction with customers.
The third stage is the scale stage. This is when a business is growing rapidly and is focused on scaling its operations.
So, when should you start raising pre-seed funding? The answer is it depends.
If you’re in the idea stage, you may not need to raise pre-seed funding just yet. You may be able to self-fund your business or seek out funding from family and friends.
However, if you’re in the traction stage, it may be time to start thinking about how to get pre-seed funding. This type of funding can help you take your business to the next level and scale your operations.
If you’re not sure whether you’re ready to start raising pre-seed funding, it’s always a good idea to speak with a startup accelerator or business incubator. These organizations can help you assess your business and determine whether you’re ready to start raising funds.
How to Find the Right Investors for Your Business
If you're an entrepreneur looking for funding for your business, it's important to find the right investors who will be a good fit for your company.
How to get pre-seed funding?
There are a few things to consider when you're searching for investors, such as what stage of funding your business is in, what type of business you're running, and what type of investment you're seeking.
You'll also want to make sure that the investors you're considering are a good fit for your business in terms of personality and values.
Once you've found a few potential investors who meet your criteria, it's time to start pitching your business and see if they're interested in funding your company.
(Source)
How to Attract Attention from Pre-Seed Investors
When it comes to attracting pre-seed investors, it’s all about having a great idea and a great team. However, you also need to be able to articulate your vision and value proposition in a way that resonates with investors.
Here are a few tips to help you get the attention of pre-seed investors.
1. Do Your Research
Before you even start reaching out to investors, it’s important to do your research and identify which investors are the best fit for your startup. Once you’ve identified your target investors, take the time to learn about their investment portfolios and what type of companies they typically invest in.
2. Build a Strong Pitch Deck
Your pitch deck is one of the most important tools you have when it comes to attracting investors. Make sure your pitch deck is clear, concise, and visually appealing.
3. Have a Great Elevator Pitch
You never know when you’re going to run into a potential investor, so it’s important to have a great elevator pitch prepared. Your elevator pitch should be no more than 30 seconds and should be able to articulate your value proposition in a clear and concise way.
4. Be Prepared to Answer Tough Questions
Investors are going to want to know everything about your startup, so you need to be prepared to answer tough questions. Be honest and transparent in your responses and be prepared to back up your claims with data.
5. Have a Clear Exit Strategy
Investors want to see that you have a clear exit strategy. Be honest about your plans for the future and how you plan to generate a return on investment for your investors.
By following these tips, you’ll be well on your way to attracting the attention of pre-seed investors.
Making the Most Out of Your Pre-Seed Investment
If you're like most startup founders, you're probably always on the lookout for ways to get funding and scale your business.
Here are a few tips on how to get pre-seed funding.
1. Use Your Pre-Seed Investment to Validate Your Business Model
One of the best ways to use your pre-seed investment is to validate your business model. This means using the funds to test out your product or service with potential customers and seeing if they're actually willing to pay for it.
If you can validate your business model, it will be much easier to raise additional funding from investors down the road.
2. Build a Strong Team
Building a strong team means hiring talented individuals who can help you grow your business.
Investing in a strong team will pay off in the long run, so make sure to use your pre-seed funding to attract the best talent possible.
3. Focus on Growth
Finally, it's important for any startup to focus on growth. This means using the funds to grow your business in a sustainable way.
There are a number of ways to do this, but some of the most effective include investing in marketing and sales, expanding into new markets, and developing new products or services.
Key Takeaway: Pre-seed funding can be used to validate your business model, build a strong team, and focus on growth.
Risks Associated With Seeking Pre-Seed Funding
There are many risks associated with seeking pre-seed funding, but the most common ones are:
- You may not get the full amount of funding you need.
- You may not be able to find a lead investor.
- Your business may not be ready for investment.
- You may not be able to get the valuation you want.
- You may not be able to meet the conditions of the investment.
Conclusion
If you're looking at how to get pre seed funding for your startup, there are a few different options available. Debt financing, equity financing, and crowdfunding are all viable choices depending on your needs and goals.
Do some research to figure out which type of funding is right for you, and then start reaching out to potential investors. With a little effort, you should be able to raise the money you need to get your business off the ground.
About AngelSchool.vc
AngelSchool.vc is a Fellowship program dedicated to helping Angel Investors build syndicates. We give Program Fellows a syndicate blueprint in just 8 weeks.
After that, they’re invited to join our Investment Committee (IC) to get real deal experience AND earn carried interest. Apply for the next cohort of our Syndicate Program here.
The AngelSchool.vc Syndicate is backed by 1000+ LPs and deploys $MNs annually. Subscribe here for exclusive dealflow.
