- Your first pre-seed funding round: A founder's guide
- What is pre-seed funding?
- Defining pre-seed
- What is pre-seed funding used for?
- Pre-seed vs. seed funding
- When are you ready for a pre-seed round?
- Who invests at the pre-seed stage?
- Friends and family
- Angel investors and syndicates
- Accelerators and incubators
- Crowdfunding
- How to get pre-seed funding
- Step 0: Preparing for funding
- Step 1: Set up your cap table
- Step 2: Develop your pitch and story
- Step 3: Build your investor list
- How pre-seed funding impacts your cap table
- Understanding SAFEs and convertible notes
- Modeling dilution from your pre-seed round
- Common pre-seed fundraising mistakes to avoid
- Frequently asked questions about pre-seed funding
- How much should you raise in a pre-seed round?
- How long does a pre-seed round take?
- Can a solo founder raise a pre-seed round?
- Download the SAFE Fundraising 101 e-book
At one time, the seed round was the first fundraising round for most startups. But over the last decade, as the startup ecosystem grew and seed rounds became larger, the pre-seed round became more common. What exactly defines a pre-seed round, though, is still up for debate.
What is pre-seed funding?
Pre-seed funding is the earliest investment a startup receives. Startup funding is divided into rounds, which include seed, Series A, Series B, and so on. Pre-seed funding is any funding that comes before the seed round. Beyond that, there is not much consensus in the startup community as far as the definition of pre-seed funding.
While there's no single path, data from Carta's first-ever pre-seed fundraising report confirms that founders at this stage typically raise capital from a mix of friends and family, angel investors, and pre-seed venture capitalists (VC). This initial investment happens before a company has a finished product or any revenue, serving as the essential fuel to get a business off the ground. Timing has a huge impact on innovation, making the pre-seed stage a critical moment to get right. It’s a bet on you, the founder, and your vision for the future.
While the definition can be fluid in the fast-moving startup world, the goal of early-stage funding is typically to secure enough resources to build a prototype, conduct market research, and assemble a founding team. Think of it as the capital you need to prove your initial concept and prepare for the next stage of your journey.
At this funding stage, investors are looking for signals that you have a deep understanding of the problem you're trying to solve. They want to see your passion, your unique expertise, and your resilience in the face of early challenges. Your ability to articulate a clear vision is more valuable than any financial projection.
Defining pre-seed
Historically, Carta defined pre-seed funding as funding before a company’s first priced round. Most pre-seed funding comes in the form of convertible instruments, like Simple Agreements for Future Equity (SAFE). But some companies now raise early priced rounds, which they refer to as pre-seed.
Some definitions include angel investment and “friends and family” rounds under the umbrella of “pre-seed” investment, while other definitions separate these, defining only institutional money as pre-seed funding. Our goal is not to get lost in semantics, but instead provide robust resources for the type of funding available to early-stage startups, to ultimately help founders find the right investors. For that reason, this article will outline types of pre-seed funding, and ways to raise it, with the broadest possible scope.
What is pre-seed funding used for?
Pre-seed money is often used for early product development and company formation. Some examples of how companies may use pre-seed funding are:
Company set-up, including incorporation, legal fees, and establishing basic tech stack
Market research and customer identification
Product development and finding a minimum viable product (MVP)
Making key early hires and building your founding team
Achieving early milestones to show traction before raising a seed round
Pre-seed vs. seed funding
It’s important to understand how pre-seed fits into the broader startup funding landscape. While the names are similar, the goals and expectations for pre-seed and seed funding are very different. Clarifying this distinction will help you set the right milestones and approach the right investors.
Thinking about these as distinct stages helps with strategic planning, which is especially important in a tough fundraising environment where valuations are down and the lines between rounds can sometimes blur. Pre-seed is about discovering the right questions to ask about your target market and product. Seed funding is about having found some of the answers and being ready to invest in growth.
The following table breaks down the key differences between a pre-seed and a seed round.
Pre-seed round | Seed round | |
Primary goal | Validate the problem and solution | Achieve product-market fit and scale |
Company stage | Idea, prototype, or early MVP | Working product with early traction |
Focus | Building the initial product and team | Growing the user base and revenue |
Typical investors | Friends and family, angel investors, accelerators | Angel investors, seed-stage VCs |
Typical amount raised | Typically a few hundred thousand dollars (e.g., ~$250,000 to $1 million), though some rounds are smaller or larger | $500,000 to $5 million |
Priced or convertible | Convertible | Either |
Equity issued | SAFEs or convertible notes | SAFEs, convertible notes or preferred stock |
Use of funds | To test your idea | To gain early traction and start selling |
When are you ready for a pre-seed round?
So, how do you know it's the right time to seek pre-seed capital? While readiness is more about qualitative milestones than revenue, industry data shows that pre-seed is often the first institutional round for companies under two years old. Before you start fundraising, you should be able to confidently check off the following items.
You have more than just an idea: Investors want to see tangible progress that shows your commitment and ability to execute. This could be a simple prototype, a detailed product mockup, or a minimum viable product built with no-code tools or through bootstrapping.
You have validated the problem: You've conducted initial customer discovery interviews and can clearly articulate the pain point you're solving for a specific audience. You should have evidence that people want and need your solution, gathered from real conversations with potential users.
You have a compelling story: At this stage, investors are backing you as much as your idea. You need a clear narrative about why you are the right person to solve this problem and why your team has the unique insight to succeed. This story connects your personal journey to the problem you're solving.
You have a clear plan for the funds: You can explain exactly how you will use the investment to reach your next set of milestones. This isn't a complex financial model, but a simple roadmap that includes headcount planning to show you are a responsible steward of capital.
Who invests at the pre-seed stage?
Once you've decided you're ready to raise, the next question is: Who do you talk to? Pre-seed investors are a unique group because they are comfortable with the high risk and ambiguity that comes with backing an unproven idea. These are the first believers who provide the foundational capital for your journey.
Your pre-seed round will likely be funded by one or more of the following types of investors, some of whom may be non-accredited investors subject to federal investment limits. There are a number of sources of pre-seed funding available, depending on your company circumstances.
Friends and family
A friends-and-family funding round is when an early-stage startup raises initial capital from the personal network of the founders. This is often the very first source of capital for a new startup, coming from people in your personal network who believe in you. Friends-and-family investors are often betting on what they know about the founder rather than what they know about the vertical or industry.
While this can be an accessible way to get started, it's important to remember that the ability to raise money from friends and family is certainly not available to all entrepreneurs and likely contributes to continued inequity in the startup ecosystem. Availability depends on the assets and liquidity within your personal network. If a friends-and-family round isn't in the cards for your startup, know that there are other options, and a startup doesn't need to raise a friends-and-family round to succeed. Many successful startups did not raise money from the founders’ families.
Even though the investment comes from a personal connection, you must treat it with the same seriousness as you would an investment from a stranger. Always use proper legal agreements and term sheets to document the investment, regardless of the source. This protects your personal relationships by setting clear expectations and prevents future misunderstandings about company ownership.
Angel investors and syndicates
An angel investor is a wealthy individual who invests their own money into early-stage companies. They are often successful founders or experienced operators themselves and can provide invaluable mentorship and industry connections in addition to capital. This kind of support is often called smart money.
An angel syndicate is a group of angel investors who pool their capital to make a single, larger investment. These are often organized through a legal structure called a special purpose vehicle (SPV). For founders, raising from a syndicate can be an efficient way to fill a funding round while bringing on a group of supportive investors with diverse expertise.
Angels must be accredited investors, meaning they meet certain criteria including $1 million in net worth, $200,000 in annual income, or proof of certain financial knowledge.
Accelerators and incubators
Accelerators and incubators are fixed-term, cohort-based programs that can provide guidance, mentorship, and access to funding for startups in exchange for an equity stake in the company. Some accelerators and incubators make direct cash investments in the startups they support, while others connect founders to a powerful network of fellow founders and investors.
Accelerator programs, which require startups to apply for participation, typically run a few months and conclude with a demo day when startups present their ideas to peers and potential investors. Examples of accelerators include Y Combinator and Techstars.
Incubators help startups in a similar way, although typically over a longer period of time. While accelerator programs usually take place over a few intense months, incubators are places founders can build businesses, often for a year or more. Incubators often provide a co-working space for their startup founders to use as an office during the early stages of company building, as well as providing mentorship, networking, and sometimes funding. Some incubators are geographically based nonprofits, hoping to support innovative businesses in their region. Examples of incubators include Capital Factory in Austin, TechNexus in Chicago, and Le Camp in Quebec City.
Venture studios
One type of incubator is a venture studio, which functions as a hybrid between a traditional incubator and a venture capital firm. A venture studio will foster a startup idea from ideation, hiring a team of founders, mentoring them, and funding the venture, often through pre-seed and seed stages. Partners at the studio may stay on as co-founders as the startup grows.
A venture studio success can lead to a long-term partnership, often up until an exit event like an initial public offering (IPO) or acquisition, unlike an accelerator or incubator which may “graduate” startups after a few months or a year. Examples of venture studios include Flagship Pioneering, Atomic, and AlleyCorp.
Crowdfunding
Equity crowdfunding is the process of collecting small contributions from many people, typically through online crowdfunding platforms. Some crowdfunding websites specialize in fundraising for businesses and can get the pitch out to a large group of general investors (unaccredited investors included). Examples of crowdfunding sites include Republic, NetCapital, StartEngine, and WeFunder.
How to get pre-seed funding
Getting ready for your pre-seed round is about more than just having a good idea. It’s about building credibility and demonstrating professionalism from day one. This practical, step-by-step guide will help you get investor-ready.
Step 0: Preparing for funding
There is not a one-size-fits-all solution for how best to raise money. But here are some steps you may want to take to optimize your ability to raise pre-seed funding:
Get to know fellow founders. Fundraising can be a long, rollercoaster-like process. In addition to tactical advice and potential introductions to investors, building a network of fellow founders means having confidants and friends who “get it.”
Know the fundraising market. There’s a lot of information asymmetry between founders and investors. But one way you can mitigate this is by learning as much as you can about the fundraising environment you’re approaching. Know the data and trends on valuation and round size for your stage and vertical.
Network with potential investors before you raise. Fundraising can take a while, but once you start to get term sheets, you’ll want to be positioned to move quickly to close your round. A great way to set yourself up for this is to network with investors before you start your official raise. Get coffees and seek advice and feedback as you hone your pitch. Keep in touch so you are not starting from zero when you begin your fundraise.
Apply for accelerators and incubators. These programs can be a great way for early stage companies to find community, mentorship, and funding. In addition to well-known national programs like Y Combinator and Techstars, consider checking out regional incubators near you.
Step 1: Set up your cap table
Before you can sell a piece of your company, you need a single, accurate record of who owns what. This record is your cap table, and it is the non-negotiable foundation of any fundraise. You cannot sell something if you do not have a clear record of what you own.
Relying on spreadsheets for equity management can lead to costly legal errors down the road, especially during critical events like an audit. Any cap table mistakes discovered during the due diligence process will only inflate costs and delay your progress. Version control issues, hidden formula errors, and the general risk of looking disorganized can kill a deal before it even starts.
For founders of Coffee Resurrect, getting organized early was key to preparing for their next round of funding. Using an equity management platform to manage their cap table from the start allowed them to build a scalable foundation for growth with confidence.
You can start right by using a dedicated platform like Carta Launch, which provides free cap table management for early-stage startups.
Step 2: Develop your pitch and story
At the pre-seed stage, a compelling story is often more important than a detailed financial model. Your pitch should focus on the narrative behind your company, conveying the passion and conviction that drives you. The pitch deck is just the visual aid for the story you tell.
Build a simple and clear pitch deck that answers these fundamental questions:
What is the problem you are solving?
What is your unique solution?
Who is your target customer?
Why is your team the one to build it?
Step 3: Build your investor list
Don't send mass emails to every investor you can find. Be strategic. Research and target investors, an important step in finding investors who have a track record of pre-seed investing in your industry and who have backed companies with a similar vision and business model.
Whenever possible, seek warm introductions through your personal and professional network, as this provides social proof and helps you get past gatekeepers. Use your initial meetings to gather feedback and build relationships rather than going for a hard sell immediately. The goal is to find partners who are genuinely excited about what you're building and can provide more than just capital.
How pre-seed funding impacts your cap table
Understanding how pre-seed funding affects your ownership is one of the most important—and often misunderstood—parts of the process. To help demystify this complexity, Carta has created an early-stage founders collection.
Most pre-seed rounds are raised using convertible instruments—a category that includes both SAFEs and convertible notes. In fact, these unpriced instruments have become the default for a company's first fundraise.
Understanding SAFEs and convertible notes
Most pre-seed rounds are raised using convertible instruments, which are agreements that convert into equity at a future date. They allow you to raise money quickly without needing to set a firm valuation for your company.
A SAFE is a contract that allows the investor to provide funding to your company now in exchange for the right to receive preferred stock when the company conducts a future priced funding round. It is not debt and it is not equity yet, but a promise of future equity in priced rounds.
A convertible note is a form of short-term debt that converts into equity at a later date, typically during your next funding round. Unlike a SAFE, it usually accrues interest and has a maturity date, at which point the debt must be repaid or converted.
Both instruments use key terms to determine how the investment converts into equity. A valuation cap sets the maximum company valuation at which the investor's money converts, protecting their early investment, even if the company achieves a high valuation in the next round. A discount gives the investor a percentage off the share price paid by later investors.
Carta’s SAFE financing and fundraising tools can help you issue and manage these agreements electronically, keeping your records clean from the start.
Modeling dilution from your pre-seed round
A founder's core fear is often, “How much of my company am I actually giving away?” It's a valid concern, especially because a valuation cap is not the same as a startup valuation and can be misleading if not properly understood. The cap is simply a term in a contract that only comes into play when a future event happens.
The best way to avoid surprises is to model how these convertible instruments will impact your ownership using a SAFE and convertible note calculator. With scenario modeling, you can visualize how different SAFEs will convert and affect your ownership percentage after the next round. This empowers you to negotiate better terms and understand the true cost of the capital you're raising, turning a scary unknown into a manageable variable.
Common pre-seed fundraising mistakes to avoid
For first-time founders, it’s easy to make missteps while navigating your first fundraise. Think of this as friendly advice from a fellow founder who has been there before. Here are some of the most common pitfalls and how you can avoid them.
Not having a clean cap table: We can't stress this enough. Managing your company's ownership on a spreadsheet is risky, time-consuming, and looks unprofessional to serious investors. It creates friction and costs significant time and money to fix later on.
Stacking too many convertible instruments: Raising money on multiple SAFEs or notes with different valuation caps and discounts creates a messy and complex cap table.
Giving away too much equity too early: Be mindful of share dilution from the very beginning. For context, the median dilution for seed deals in the third quarter of 2024 was 20%—a figure that VCs frequently cite as an established industry standard. Selling too much of your company in the pre-seed and seed stages can leave you with little ownership, which is why it's important to model your round's impact.
Frequently asked questions about pre-seed funding
How much should you raise in a pre-seed round?
You should aim to raise enough capital to give you a sufficient runway to hit the key milestones needed to raise a successful seed round. For most pre-seed startups, this means securing enough funding to operate for at least a year to a year and a half. While every company's needs are different, recent data provides a useful benchmark: The median capital raised in seed rounds was $3.8 million in the third quarter of 2024.
How long does a pre-seed round take?
While some rounds can close quickly, you should be prepared for the fundraising process to take several months. From your first investor conversation to having the money in the bank, it's wise to plan for a timeline of at least a few months. With the time between funding rounds lengthening, founders need to plan for a longer runway.
Can a solo founder raise a pre-seed round?
Yes, it is possible, although many investors prefer to see a founding team of at least two co-founders. Data shows that solo founders are less likely to raise VC: While they comprised 35% of all companies incorporated in 2024, they accounted for just 17% of companies that closed a venture round that year. A solo founder with deep domain expertise, a clear vision, and tangible progress on their product can absolutely succeed in raising a pre-seed round.
Download the SAFE Fundraising 101 e-book
Learn everything you need to know about fundraising with SAFEs, including:
Benefits and challenges of SAFEs
The difference between pre-money and post-money SAFEs
The difference between convertible notes and SAFEs
How dilution works with SAFEs
DISCLOSURE: This communication is on behalf of eShares, Inc. dba Carta, Inc. ("Carta"). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. ©2026 Carta. All rights reserved. Reproduction prohibited.
