- Build | Raise | Scale: Learn how to raise funds for your business
- Posts
- Pre-Seed Funding Explained
Hi, this is Steven from Drop. If you’d like to see if we can help you grow your business get in touch today.
Pre-Seed Funding Explained: What Every Entrepreneur Needs to Know
Are you at the beginning of your startup journey? You might be hearing a lot about 'pre-seed funding' and wondering what it's all about. Don't worry; this easy-to-understand guide is here to help you grasp the basics of pre-seed funding and show you how to secure it for your business venture.
Understanding Pre-Seed Funding
Pre-seed funding is the earliest financial boost for your startup. It's the money you need when your business is just an idea, helping you bring that idea to life. This stage is crucial as it allows you to develop your product concept, build a basic prototype, or a minimum viable product (MVP), and start putting together a small team.
The Difference Between Pre-Seed and Seed Funding
It's important to distinguish between pre-seed and seed funding. Pre-seed funding is all about starting from scratch. It's about turning your idea into a basic, workable model. Seed funding, on the other hand, is for refining your product and preparing it for a wider market.
How Pre-Seed Funding is Used
Typically, pre-seed funding is used for:
Developing your MVP (Minimum Viable Product)
Hiring essential team members
Outlining a growth strategy
Understanding your market and potential customers
How Much to Raise and How
In the UK, startups often raise between £50,000 and £250,000 in pre-seed funding. The amount you seek depends on how much of your company (equity) you're ready to offer to investors.
Step-by-Step Guide to Raising Pre-Seed Funding
Create a Compelling Pitch Deck: This is a presentation that explains your business idea, market potential, and how you plan to make it successful.
Determine Your Company's Valuation: This step is critical as it influences how much money you can raise. The valuation should reflect the potential of your business and the amount of equity you are willing to part with.
Identify Potential Investors: Focus on individuals or groups who are known to invest in early-stage startups. Angel investors are usually more approachable at this stage than venture capitalists.
Consider Incubators and Accelerators: These programs can provide funding, mentorship, and resources. However, they often require a share of your business.
Expanding Your Funding Search
While family and friends are often the first funding source, don’t limit yourself. Research and reach out to angel investor networks and alternative funding such as startup loans. Each has its unique advantages and can be a significant source of capital.
Making the Most of Pre-Seed Funding
Once you secure pre-seed funding, it's crucial to use it wisely. Focus on achieving the milestones you've set out in your business plan. Whether it's developing your MVP, conducting market research, or building your team, each step should bring you closer to making your business idea a reality.
Preparing for the Next Steps
Remember, pre-seed funding is just the beginning. As your startup grows, you'll likely seek additional rounds of funding. Keep building relationships with investors and keep refining your business model. This forward-thinking approach will make it easier to navigate future funding rounds and business challenges.
Raising pre-seed funding is a significant step for startups. It's about more than just getting money; it's about proving your concept, building a team, and laying the groundwork for your business. Approach this process with a clear strategy, a willingness to learn, and a focus on building strong relationships.
Build | Raise | Scale: Expert consulting for building, funding, and scaling your business.
We specialise in guiding entrepreneurs through the crucial stages of their business journey. Our focus is on providing bespoke consulting services to help you build your startup, secure funding, and scale your operations efficiently. Our approach is tailored to each entrepreneur's unique needs, ensuring that you receive the most relevant and effective strategies for your business. With our expertise, we're dedicated to helping you achieve sustainable growth and success.
Learn more:
Book a free consultation: