What is pre-seed funding?

Securing funding is one of the biggest challenges for early-stage startups, with 38% failing due to financial constraints1.

Pre-seed funding is the first external investment startups receive, helping founders develop prototypes, validate ideas, and cover initial costs. Unlike bootstrapping, it involves capital from angel investors, accelerators, and pre-seed funds. 

This article explores pre-seed investment, its key features, how it compares to seed and Series A funding, and common pitfalls founders face. We will also discuss how to approach investors and craft a winning pitch deck to secure pre-seed funding and kickstart your startup’s journey.

Understanding pre-seed funding

Pre-seed funding is the first stage of a company's funding before the company generates revenue and gets considerable investments1. Founders use the pre-seed funding round to develop the prototype, test for market demand, and cover early operational costs.

Unlike bootstrapping, where founders rely on personal savings, pre-seed investment comes from external sources like angel investors or accelerators1. This funding is crucial for proving a concept and attracting future investment. 

While bootstrapped startups grow slower, those securing pre-seed funding gain early momentum, making them more attractive for seed funding and beyond.

Who provides pre-seed funding?

Several sources provide pre-seed investment, each with different expectations and investment sizes. The following are sources of capital for pre-seed funding:

1. Angel investors1 – High-net-worth individuals who invest $25,000 to $250,000 in exchange for equity, often providing mentorship and industry connections.

2. Friends and family1 -they are flexible but informal funding sources, typically ranging from $10,000 to $100,000, though they carry personal risks.

3. Accelerators and incubators1 – Programs like Y Combinator offer $100,000 to $500,000 alongside mentorship and networking opportunities.

4. Pre-seed investment funds – Institutional investors specializing in early-stage startups, offering structured funding rounds.

5. Pre-seed investment platforms – Online platforms like AngelList help connect startups with potential investors.

Choosing the right funding source depends on a startup’s needs, desired investor involvement, and equity trade-offs.

Key features of pre-seed investment

The sources of pre-seed funding determine the structure and expectations of a pre-seed funding round. Pre-seed backers focus on the founding team, market potential, problem validation, and early prototypes unlike later-stage investors,  rather than revenue or traction2.

Understanding its key features helps founders prepare for investor discussions and optimize their funding strategy.

• Typical investment range – Pre-seed funding typically falls between $50,000 and $250,000, depending on the industry, investor type, and startup needs2.
• The role of personal capital and bootstrapping – Many founders supplement pre-seed investment with personal savings1 to demonstrate commitment, reduce dilution, and increase investor confidence.

A well-structured pre-seed funding round provides essential capital and positions startups for successful seed and Series A funding.

Pre-seed funding vs. other startup funding stages

As startups progress, they go through different funding stages, each serving a specific purpose. Pre-seed funding is the earliest, focused on validating an idea, while later rounds such as seed funding, Series A, and venture capital funding help with scaling and expansion. Understanding these differences helps founders seek the right investment at the right time.

Pre-seed vs. seed funding

• Investment amount – Pre-seed funding typically ranges from $50,000 to $250,000, while seed funding falls between $500,000 and $5 million2.
• Traction expectations – Pre-seed investors back ideas, early prototypes, or MVPs, whereas seed funding requires market validation, early revenue, and customer traction2.
• Investor type – Pre-seed investment comes from angel investors, accelerators, and personal networks, whereas seed funding often attracts venture capitalists (VCs) and institutional investors2.

While pre-seed funding is about proving an idea, seed funding focuses on scaling early traction and refining the business model.

Pre-seed vs. Series A

Pre-seed funding is used to prove an idea, develop a prototype, validate market demand, and incur preliminary expenditures2. Here, investors take high risks on a founding team or concept potential.

Starting up entails Series A funding, which is about scaling a validated business model. Since investors ask for it, there should be significant traction, consistent revenue, and a clear growth strategy. Unlike pre-seed investors, Series A backers prioritize startups that have already established product-market fit and are ready to expand2.

Pre-seed vs. venture capital funding

Pre-seed funding comes from angel investors, accelerators, and early-stage funds, supporting startups in their ideation phase1,2. It involves smaller investments, typically below $500,000, with high risk and limited due diligence.

Venture capital (VC) funding usually occurs in Series A, B, and later rounds, provided by institutional investors focused on scalable, high-growth companies. While VCs pour millions into the funding of startups with proven traction, significant revenue, and the potential for expansion, pre-seed investment is a lever for more serious VC investment3.

Advantages and challenges of pre-seed funding

The first step for startups is getting pre-seed funding, the first capital to convert ideas into operational and prospective businesses. However, pre-seed funding has advantages that outweigh the challenges faced by founders. Understanding both sides helps entrepreneurs decide when they need funding and what to expect.

Advantages

1. Helps in product development and early market validation4

Pre-seed funding allows founders to build a minimum viable product (MVP), test market demand, and refine their business model before scaling. This early validation increases the chances of securing later-stage funding.

2. Provides initial financial relief for founders4

Without external capital, many founders rely on bootstrapping, which can limit growth. The pre-seed funding round helps startups cover the basic expenses, including operation, marketing, and hiring costs, so that they can take off ahead of time. 

3. Opens doors to further funding opportunities4

Startups that successfully raise pre-seed investment are more attractive to seed and Series A investors. Having early backers also helps build credibility, signaling potential to venture capital firms and institutional investors.

Challenges

1. High investor skepticism due to lack of traction4

Unlike seed funding or Series, A rounds, pre-seed investors take a leap of faith in an unproven idea. Startups without an MVP or initial user feedback often struggle to convince investors of their potential.

2. Equity dilution concerns4

Since startups at this stage have low valuations, founders may have to offer more enormous equity stakes to secure funding. This can lead to significant dilution, reducing their ownership before later funding rounds.

4. Difficulty in securing institutional investors4

Since many venture capital firms want to back startups with some evidence of traction, getting those pioneers to the institutional investment stage at the pre-seed stage is tough. Instead, founders must depend on angel investors, accelerators, and personal networks.

However, despite these difficulties, pre-seed funding is critical for startups to construct a base, create a product, and put themselves in a place to grow.

Common mistakes founders make in pre-seed funding

Pre-seed funding can be very helpful in getting crucial early-stage capital. However, many founders miss out on early seed funding because there are avoidable mistakes. This can aid startups in knowing these traps during the process of raising funds. 

Avoiding key mistakes improves pre-seed funding success. Here are common pitfalls and how to fix them:

1. Unclear business model5– Investors want  a scalable revenue strategy. Without a clear monetization plan, startups appear too risky.

• Solution: Clearly define how your startup will make money and scale in the long run.

2. Weak market research5– Failing to prove market demand reduces investor confidence. Without data, an idea remains speculation.

• Solution: Do your research6. Conduct customer interviews, surveys, and competitor analysis to validate your idea.

3. Poor investor communication – A weak pitch, lack of follow-up, or unstructured presentations can turn investors away.

• Solution: Create a concise, data-driven pitch deck, practice storytelling, and maintain investor engagement. Be transparent in your pitch6.

If there is no traction and you set an unrealistic valuation, it will deter investors because they see excessive risk but no visibility. Startups have difficulty explaining overvaluation in terms of inflated numbers at future funding rounds6. 

To avoid this, base valuations on market benchmarks, financial projections, and comparable startup deals. It is real and secures investors, making negotiations more straightforward.

People are much more valued than ideas, especially if execution is a priority. A weak or inexperienced team makes you doubt that such a startup can scale. A team with industry, technical, and vision experience should be formed to eliminate this. Highlight team strengths in pitch decks to attract investor trust.

By avoiding these mistakes, startups improve their chances of securing pre-seed investment and progressing to seed and Series A funding. Fixing these mistakes increases pre-seed investment chances.

How to approach investors for pre-seed funding successfully

Securing pre-seed funding requires the right approach to attract investors. To attract pre-seed investors, founders should:

• Validate the business idea – Show early customer interest or prototype success7.
• Build strong networks – Engage with angel investors, accelerators, and pre-seed funding platforms.
• Create a compelling pitch – A well-structured pitch deck increases credibility7.
• Demonstrate commitment – Investors seek dedicated founders who are willing to take risks.

Investors back startups with apparent market demand and scalability. A vague or untested idea struggles to gain traction. Early validation through customer feedback, surveys, or prototype testing proves feasibility and reduces investor risk7. Demonstrating market interest strengthens your pitch and increases your chances of funding.

Strong networks open doors to angel investors, accelerators, and pre-seed funds. Attend startup events, pitch competitions, and industry meetups to connect with potential backers. 

Leverage warm introductions and LinkedIn outreach. A concise, data-driven pitch with a compelling story engages investors and builds trust.

What do you need for pre-seed funding?

At the pre-seed stage, startups have little to no revenue, making a well-crafted pitch deck essential to convincing investors of their potential. Investors use the pitch deck to evaluate the market opportunity, business model, and founding team, and it is mainly lacking in traction data. A good deck is clear, has a vision, and is ready to grow.  

Securing pre-seed funding requires having a good pitch deck. A winning pre-seed pitch deck should cover 

• Problem statement and solution – Clearly define the market problem and how your startup addresses it8.
• Market opportunity – Showcase the target market size and potential growth9.
• Business model – Explain revenue generation strategies8.
• Traction and validation – Provide early user data, prototype feedback, or pilot program results8.
• Financial projections – Highlight realistic growth expectations8.
• Team background – Investors value experienced and committed founding teams8.

These slides help investors quickly understand the startup’s potential, execution plan, and scalability. 

A clear, concise, and visually engaging pitch deck captures investor attention and improves funding odds. Well-structured decks help investors see the startup's strengths and growth potential, leading to faster decision-making and higher chances of securing pre-seed investment.

Get a winning pitch deck for pre-seed funding.

A professionally designed pitch deck will increase your chances of securing pre-seed funding. When introducing yourself to investors, you should make a strong first impression. The dedicated deck provides visual appeal, structuring, and clarity and can also communicate the startup's vision and emphasize key business strengths.

The experts at Propitchdeckservices.com specialize in crafting compelling investor presentations tailored to each startup's unique needs. Their experience designing persuasive, data-driven pitch decks help founders stand out and attract early-stage investors.

For startups looking to maximize their funding potential, working with experts at Propitchdeckservices.com can provide the competitive edge needed to secure pre-seed investment.

Sources used in this article:

1. Startup Capital: Your Ultimate Guide to Funding in 2025: http://spectup.com/resource-hub/understanding-startup-financing 
2. Decoding Pre-Seed and Seed Funding: A Comprehensive Guide for Entrepreneurs: https://www.goingvc.com/post/decoding-pre-seed-and-seed-funding-a-comprehensive-guide-for-entrepreneurs 
3. Private Equity vs Venture Capital, Angel/Seed Investors: https://corporatefinanceinstitute.com/resources/equities/private-equity-vs-venture-capital-vs-angel-seed/ 
4. The pros and cons of raising a pre seed round: https://fastercapital.com/content/The-pros-and-cons-of-raising-a-pre-seed-round.html 
5. Overcoming Challenges: Common Pitfalls for Startups and How to Avoid Them: https://wadhwanifoundation.org/overcoming-challenges-common-pitfalls-for-startups-and-how-to-avoid-them/ 
6. The High Cost of Overvaluation: How Startup Valuation Impacts Fundraising Effort: https://www.finrofca.com/news/the-high-cost-of-overvaluation 
7. How to raise seed money for your startup: Best practices for different funding sources: https://stripe.com/in/resources/more/how-to-raise-seed-money-for-your-startup-best-practices-for-different-funding-sources 
8. How To Build A Winning Pre-Seed Pitch Deck: https://www.antler.co/academy/pre-seed-pitch-deck