Pre seed funding is the initial funding round, where the investors get their capital for their business. It has a series of rounds and may follow funding from angel rounds or bootstrapping with your financial resources.
When your startup is ready to raise pre-seed funding?
Every business can raise a pre-seed fund. However, some indicators will ensure you opt for it.
- You can determine the potential of your product in the market.
- Your business can raise revenue.
- You need money for prototype development.
- You have a founding team with the required experience and background.
How to raise your pre-seed funding?
1. Select the right investors:
The most important is to target funds and investors to raise your fundings for your startup. They must take the risk and decide convictions and the future potential instead of revenue and sales figure.
There are three kinds of investors for pre-seeding funds:
These investors make small investments. But you can secure your pre-seed fund quickly from them as they are the decision-makers. However, if they are already a part of your business venture, they will invest in the success of your business.
Pre-seed investment for capital funds
These funds are limited to partner investors only. The capital venture funds represent more significant investments at the pre-seed funding rounds. It involves critical decision making.
Incubator or accelerator programs
These are the crash courses for startups. Startup companies raise their pre-seed funds and have to take training, discounted and free resources, and networking opportunities. These are helpful for the funding rounds later.
Before selecting an investor:
- Research their funding background with their investors.
- Try to connect with those who have worked with similar business startup.
- Reach directly with the most experienced one, and you can earn a greater response rate from your investor.
2. Try to Attract the Attention of Your Investors:
If your business is already gaining sales and traction, the chance of gaining pre-seed funds becomes more. However, four attributes can help you convince investors even when you do not have a good service or product.
A proper introduction
The best you can connect with potential investors is by introducing someone you trust and have made investments with them previously.
A qualified founder
Firstly, build a team if you are working as a sole founder. It may be challenging to develop your product, but your background depends on your business. So, find it early as possible.
An excellent entrepreneurial personality and background
Your personality is crucial for your business startup. Investors will see whether you can take risks for your business and check your background. Having exciting knowledge will encourage investors to trust you and your business.
3. Reveal More About Your Business:
Tell a short story about your business while attracting investors. You can add the following details:
- Problems that you are solving.
- A unique solution for the problem
- Business model
- How you are planning to increase your revenue in the next five years
- The required money you need to achieve your goals.
- How to increase your customer’s base
Thus, it would help if you prepared a scenario for modelling your financial projections. These will help you attract potential investors and know more about you and your business before investing.