The Funding Series · Part 2 of 7
Pre-Seed Funding: What It Is, What Investors Want, and How to Raise It
Pre-seed funds the idea before there is much to show. Here is what the stage is really for, what the earliest investors look for, and exactly what belongs in a pre-seed pitch deck.
In this guide
Pre-seed is the stage where you have the least to show and the most to prove. There is often no revenue, sometimes no finished product, occasionally nothing but a sharp idea and a founder convinced enough to chase it. And yet money changes hands, because the earliest investors are not buying what exists today. They are buying who is building it and why.
This is the first rung on the ladder mapped out in our complete guide to startup funding. Getting it right sets the tone, and the ownership, for everything that follows.
What pre-seed is actually for
Pre-seed funds the journey from idea to first evidence. Concretely, it buys enough time and resources to build a first version of the product and put it in front of real people to see whether they want it.
The amount is deliberately small, because the goal is not to build the whole company. In the US, Carta puts the median pre-seed round at roughly 1 million dollars on a 4 to 6 million dollar post-money valuation, giving up 10 to 15% of the company; in African markets, pre-seed cheques often sit lower, from tens of thousands to a few hundred thousand dollars. It is to reach a single milestone that makes the next, larger seed round possible. Raising too much at pre-seed is not a win. It dilutes you heavily at the lowest valuation you will ever have, and it can paper over the hard work of proving demand cheaply.
The discipline that matters most here is knowing your one milestone. Is it a working product? A waitlist of a thousand? Ten paying pilots? Name it, price the runway to reach it plus a few months of buffer, and raise that. No more.
What pre-seed investors look for
With almost no metrics to analyse, pre-seed investors fall back on judgement across four things.
The founder. This is the single biggest factor. Do you understand the problem more deeply than almost anyone? Are you credible and resilient? Founder-market fit, some real reason you in particular are suited to this problem, carries enormous weight when there is little else to weigh.
The problem. Is it a real, painful, widely felt problem, or a nice-to-have? Investors want a problem so sharp that a rough solution still gets used.
Why now. Why is this the right moment? A shift in technology, regulation, behaviour or cost that makes something newly possible. Timing turns a good idea into a fundable one.
The market. Could this become very large? Pre-seed investors are hunting for outsized outcomes, so the ceiling has to be high, even if the path there is still fuzzy.
Any evidence of demand short of revenue helps enormously: a working prototype people actually use, an engaged waitlist, a pilot, or letters of intent from would-be customers. None of it needs to be revenue. It needs to show that the pull is real.
What belongs in a pre-seed pitch deck
A pre-seed deck sells conviction, not spreadsheets. Keep it to around ten slides and let the story carry it.
- Vision. One line on the world you are building toward. Make it specific and ambitious.
- Problem. The painful, real problem, framed around who suffers and how much. Make the investor feel the cost of it.
- Insight. The non-obvious thing you understand that others have missed. This is where pre-seed decks win or lose; it is the reason you, now.
- Solution. What you are building, shown simply. A screenshot or prototype beats paragraphs of description.
- Why now. The shift that makes this possible today and not three years ago.
- Market. How big this could become, built bottom-up, not “1 percent of a trillion-dollar market.”
- Early signal. Any proof of pull: waitlist, pilots, prototype usage, intent. Even small numbers matter here.
- Team. Why this team, and specifically why you, are suited to this problem. Founder-market fit front and centre.
- The ask and use of funds. How much you are raising, on what instrument, and the one milestone it will reach.
- Vision, restated. Close on the size of the opportunity.
Notice what is absent: detailed financial projections, complex unit economics, five-year revenue models. At pre-seed those signal false precision. A credible view of how the money reaches the next milestone is enough.
How the money comes in
Most pre-seed rounds use a SAFE (Simple Agreement for Future Equity) or a convertible note rather than a priced round. The reason is practical: pricing a company with no revenue is guesswork, and forcing that argument slows everything down. A SAFE lets an investor put money in now and convert into shares at your next priced round, usually at a discount and often with a valuation cap. It is faster, cheaper and standard at this stage. We cover how SAFEs and convertible notes work, and how to choose, in later posts in this series.
Common pre-seed mistakes
- Raising too much. A large pre-seed at a low valuation costs you ownership you will badly want back later. Raise to the milestone.
- Over-engineering the deck. Elaborate financial models at pre-seed read as naive, not thorough. Sell the insight.
- A vague ask. “We are raising to grow” tells an investor nothing. “We are raising 200,000 dollars to ship v1 and reach 500 paying users” tells them everything.
- No founder-market fit story. If you cannot explain why you are the right person for this problem, you have skipped the single most important pre-seed question.
The African angle
On the continent, pre-seed capital most often comes from angel investors, accelerators, and founder or diaspora networks rather than institutional funds. Two things follow. First, warm introductions matter more, so building relationships before you need money is time well spent. Second, because cheques are smaller, capital efficiency is not optional; the founders who get funded are usually those who show they can do a lot with a little. If you are raising in dollars while spending in local currency, factor currency movement into your runway from day one, as we cover in surviving a falling currency.
What good looks like
You are ready to raise pre-seed when you can say, in three plain sentences: here is a real and painful problem, here is the non-obvious insight that lets us solve it, and here is why we are the team to do it, with early evidence that people want it. Get those three right and the small first cheque follows.
When that first product is live and real users are paying and coming back, you have reached the next rung. That is the story of seed funding.
FAQ
Frequently asked questions
How much do you raise at pre-seed?
Typically 50,000 to 500,000 dollars, sometimes up to a million. In Africa, pre-seed cheques often sit at the lower end and come from angels, accelerators and founder networks. Raise enough to reach one clear milestone plus a few months of buffer, not more.
What do pre-seed investors look for?
The founder and the insight. With almost no data to analyse, they assess whether you deeply understand the problem, whether the market is large, whether the timing is right, and whether you are the person to build this. Any early signal of demand, a waitlist, pilot or letters of intent, helps.
Do I need revenue to raise pre-seed?
No. Pre-seed usually happens before meaningful revenue. What helps instead is evidence of demand short of revenue: a working prototype, engaged early users, a waitlist, or signed intent from potential customers. Revenue is a seed-stage expectation, not a pre-seed one.
Should a pre-seed round use a SAFE or a priced round?
Most pre-seed rounds use a SAFE or convertible note. Pricing a company with no revenue is guesswork, and an instrument lets you raise quickly without forcing that argument. A priced round at pre-seed is possible but less common and usually slower and more expensive to close.
