What is pre-seed funding and how does it work?

Do you want to take the next step in growing your startup? Outside financing can help your business grow.

What is Pre seed Funding?

Pre-seed funding is mainly that small capital that you need for starting your small business. This fund usually comes from your family members, relatives, or investors. They are the first investors or stakeholders of your small business.

How does Pre seed funding works?

In starting your pre-seed funding for your small business, you have to follow these tips so that it could work better to your advantage:

Selecting the proper investors

You need to find the best and right investors that suit the goals of your company. You can find many investors that are interested in start-up companies ready to invest their resources and time. These investors should be willing to go with you every step of the way and support you and your company and your decisions.

There are many kinds of Investors; Angel Investors (small investors that are ready to make decisions by themselves); Accelerator Programs (these are investors that needs your business to be granted by the entrepreneurial community before investing); and Venture Capital Funds (these investors can give huge amounts of investments but has a much longer processing time)

Attracting the investors

Now that you know who to try and contact, you should know what to do in attracting them into investing in your venture.

  • First impressions. These are very important. You must show the potential investors that you are confident and knowledgeable of all the things about your company. You must show them that you are all the way positive to what your company could become.
  • Teamwork. You must have a team of trusted people that is one with you in your visions and goals. Trained and professional people that can be your strength in your company. These will show possible investors what your company can give and provide.
  • Background Check. If investors see your credentials and the things that you have achieved in your life as time goes by, they will be encouraged to give their trust in your company and invest in your business.

How much is pre-seed funding?

Pre-seed funding usually amounts from $50,000 to $250,000. These are usually invested by family, relatives, or small investors as they are the first stockholders of your company.

What is the difference between pre-seed and seed funding?

There are several differences between pre-seed and seed funding:

  • Amount. Pre-seed funding usually starts from $50,000 to $250,000, while seed funding amounts $500,000 to $2 million dollars.
  • Runway duration. Pre-seed duration is about 3 to 9 months while seed funding period is 12 to 18 months.
  • Investors. Seed funding investors are typically from bigger companies while pre-seed investors are usually family members, relatives, and small-time investors.
  • Attraction. You could attract pre-seed funding investors by having your product working in the best way and you have established your own market. While you can attract seed funding investors by showing your good strategy and techniques and you have the best team for you and your company.

How long should pre-seed funding last?

Usually, pre-seed funding lasts 12 to 18 months from the day you have started in your venture, it is said to be the most practical and advisable duration in your pre-seed fund. But it is also a good thing to stay on your pre-seed funding as long as you think your company needs it. As you start to set your business up and begin operations until you think you still need it then you can continue having this kind of funding.

Now that you know all about pre-seed funding and its importance, and what advantages you can get with it, you can now consider working on a way of how to start up your business venture. Just make sure that you know all about your business, products, and services so that you can set all your goals for the future of your company and find more investors ready to be with you in your journey.

Related article: Startup Funding Stages

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