A successful startup company contributes to the country’s ecosystem in many ways. While many great ideas reside in the young entrepreneurs’ minds, not all of them successfully get outside investment or internal investment sources. Pre-Seed Funding, also known as Pre-Seed Capital, is a form of external investing at a pretty early stage of incorporating a startup company.
Want to know about the Pre-Seed Funding process? Are you looking to raise funds through Pre-Seed Funding and want to kick-start your startup business idea? Then, you have landed on the right page. Here’s all that you should know about Pre-Seed Funding.
Understanding ‘Pre-Seed Funding’
There are various rounds of Funding or Financing the operations of startup companies for product development and business expansion. Pre-Seed Funding, also known as early-stage funding, occurs before Seed and Series A, B, and C Funding. Many times, founders, friends, and relatives provide the Pre-Seed Funding to develop the product.
However, when it comes to pitching to the investors to raise Pre-Seed Money, the intensity of the competition is very high due to many business ideas in the market. But the investors would only pick a few and invest their money to provide the Pre-Seed Funding.
Pre-Seed Funding Indicators
As a new market entrant, you may have a slight idea of when to get the pre-seed funding, or is it the time for your to get the financing through pre-seed funding. Let’s understand which are these indicators:
- Your product has the potential to fit into the market demands.
- You developed a team of founders and members who have relevant expertise and experience.
- Your business idea has started earning you some money.
- Your business has reached a stage where you will have to hire certain skilled professionals.
- Your product development needs some cash to move further.
- Your product has developed a minimum level of features called a Minimum Viable Product (MVP).
- You developed an adequate client or customer base who started using your product to give you feedback.
Types of Pre-Seed Funding Investors
Pre-Seed Funding Investors know that they will not get any sales or revenue figures to base their decisions on. They use their conviction to decide whether to invest in a startup company or not. Below are the types of Pre-Seed Funding Investors:
1) Pre-Seed Investment Venture Capital Funds
Venture capital firms invest a considerable amount in startups. However, they pick one company out of many startup companies to invest their money in. The VCs have a few partners who act as an investment pool between the startup and investors.
2) Angel Investors
Angel investors are quick investment sources to fund your startup. They invest small amounts, but the ease of raising money through angel investors is relatively smooth.
3) Incubator Programs
Accelerator or Incubator Programs provide funding to the selected startup companies and requisite training, entry to the entrepreneurial community, introduction to the best VC firms, free resources. They provide funding to get an equity stake in the startup company, which gets selected from the most strenuous application process.
Pre-Seed Funding is a bit tough to get as you do not have the financials or performance-based results to present to your potential investors. A strong idea can easily catch investors’ minds, and obtaining Pre-Seed Funding determines the success of the subsequent funding. ,