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For many startups, the need for funding begins even before they have a fully developed product or service to bring to market. In fact, a founder may have nothing more than a great idea, yet still need capital to take it to the next level. The question is, where can they get it?
That’s where pre-seed funding comes in. While you may have heard of seed funding, the first official round of funding for a startup, pre-seed funding comes into play even earlier in the game. It’s capital from investors who are willing to gamble on not much more than a viable idea for a new business.
While pre-seed investment can be difficult to get, it may help fast-track your startup’s growth. Read on to learn how pre-seed funding works, who provides it, and how to pursue a pre-seed investment.
Key Points
• Pre-seed funding is the first stage of capital raised by startups, often used to transform an idea into a workable prototype or product concept.
• Pre-seed rounds are usually smaller than seed rounds. More than a third of pre-seed rounds raised less than $250,000 in late 2025, while the median seed round reached $4.5 million.
• Pre-seed funds are used to build the foundation of the business, such as product development or market research.
• Pre-seed investments carry significant risk for investors, as businesses are in their infancy with little to no market validation or revenue.
• Pre-seed funding often comes from personal savings, family, friends, or angel investors. You may also be able to turn to small business grants and loans for pre-seed funding.
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What Is Pre-Seed Funding?
Pre-seed funding is an early funding round in which investors provide a startup with capital to develop its product, usually in return for the right to receive equity later.
Pre-seed funding comes before the “official” rounds of funding, which include seed funding, followed by Series A, B, and C stage funding. Generally, this type of investment is made when a venture is still in the proof-of-concept stage and provides founders with enough capital to get off the ground.
How Does Pre-Seed Funding Work?
Like other types of startup funding, pre-seed funding involves receiving a certain amount of working capital in exchange for equity in your business. As your startup grows, that equity may become more valuable, and investors may be able to cash in if your business gets purchased or goes public.
Why Is Pre-Seed Funding Important?
Pre-seed funding for startups is important because it’s that idea, that seed, that needs to be taken care of and nurtured in order to become a full-fledged, blooming business.
Without money for research and development or employees who can turn that idea into reality, your startup may never actually get off the ground. Pre-seed funding may provide the resources needed to establish the foundation of your business. Later rounds of financing may help you build on that foundation.
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Pre-Seed vs. Seed Funding
There are similarities between pre-seed and seed funding, since all funding rounds tend to overlap slightly. For example, both pre-seed and seed funding are used to cover early expenses, like hiring and research and development, for a new product offering.
However, there are some key differences. For one, pre-seed funding isn’t generally considered an official round of funding, whereas seed funding is. Pre-seed funding also tends to be smaller than seed funding.
Another key difference: With pre-seed funding, investors don’t expect your startup to have done much yet. With seed funding, on the other hand, investors often require that the company has already developed its product and has somewhat of a customer base.
Finally, pre-seed funding is riskier to investors than seed funding, since it’s possible the product may never even make it to market.
What Is Pre-Seed Funding Used For?
You can use pre-seed funds for anything that helps you get your idea off the ground. That includes researching the market to understand who your audience is, hiring staff, renting office space, developing a prototype, manufacturing that prototype into something scalable, and marketing your product or service to those first few customers.
How Soon Does It Make Sense to Look for Pre-Seed Funding?
Even though pre-seed funding is for the earliest stage of a startup, you don’t want to go to investors empty-handed. A good time to research pre-seed funding is when:
• You know the niche your product fills. If you’ve done your homework, you know the market your product is designed for and can use this early-stage funding to dive deeper into how you can tailor the product to fill a need in the marketplace.
• You have a rough prototype of your product. It doesn’t have to be fully developed yet, as pre-seed funding may help work out the kinks.
• You already have some interest. Have you started showing your product to customers? Early positive feedback may be a sign that a startup has high growth potential.
• You have a revenue model. You may not yet be earning revenue, but you have a plan and a clear-cut path to making money.
Types of Pre-Seed Funding
Pre-seed funding can come from a variety of sources. These include:
Venture Capital
Venture capital is a form of financing provided by investors to startups and early-stage companies with high growth potential. In exchange for funding, venture capitalists receive equity or ownership stakes in the business.
Friends and Family
Who better to support your endeavor than the people who know you best? You may be able to get pre-seed funding from friends and family. Consider keeping it a business transaction with a loan or investment agreement that stipulates repayment or equity share.
Angel Investors
Angel investors tend to provide smaller amounts of capital than venture capitalists, which may make them particularly well-suited to pre-seed funding. Plus, many have niche specialties that could align with your business’s industry or focus.
Incubators
Incubators are programs that offer coaching and assistance to startups, including feedback on product development and connections to influential people in the entrepreneurial community. Some also include pre-seed funding, while others may help you raise funding from angel investors or venture capitalists.
Accelerators
Accelerators are similar to incubators. They typically run fixed-term programs for groups of startups and offer mentorship and access to funding in exchange for equity. Many programs end with a demo day, where founders pitch to investors.
5 Tips for Getting Pre-Seed Funding
The steps for getting pre-seed funding are similar to those for seed funding. The difference is that it can be harder to convince an investor to fund an untested product or idea. Here are some steps that may help improve your chances of success.
1. Formulate a Business Plan
You may be chomping at the bit to find the money, but you’ll first need to establish a solid foundation to attract the right investors. That starts with your business plan. This document will get ideas on paper about who your audience is, the problem your product solves, and how you’ll market it to customers.
Including your revenue model and startup costs in your business plan may show investors you’ve done your due diligence and plan to use your pre-seed funding judiciously.
2. Come Up With Your Pitch
Your business plan may help you develop a pitch deck, which is a slide presentation that tells investors everything they need to know about your startup, the product, the market, and your financial projections. Here are some ideas on what to include in your pitch:
• The need your business idea fills
• Your target market
• What makes your product/service unique
• Your revenue model
• Revenue projections for five years
• How you’ll market to customers
• Budget for pre-seed funding
• Information about you, the founder, and your business’ story
Consider keeping your pitch short and sweet, sticking to the highlights, and being ready to elaborate as you answer questions.
3. Find Potential Investors
You may want to start by using your business connections to find investors who are interested in early-stage startups. Incubator platforms may also connect you with investors specializing in pre-seed capital. As you research investors, consider looking into their track record of working with pre-seed startups, how much funding they typically give, and their experience in your industry.
4. Present Your Pitch
Investors often ask for an in-person pitch meeting before committing to your company. Once you secure that coveted pitch meeting, practicing until you can confidently give your pitch from memory may help. It may also be useful to anticipate the questions that investors are likely to ask, paying particular attention to numbers.
5. Negotiate
You may not get the terms you wanted right off the bat from an interested investor, so it may help to be ready to negotiate. Deciding in advance how much equity you’re willing to give up in exchange for capital could reduce the risk of a rushed decision in the heat of the moment. It’s also generally wise to get any deal you make in writing, especially if an investor is committing their time and resources.
Alternatives to Pre-Seed Funding
The types of investors listed above aren’t your only options for getting the capital you need for your startup. Here are a few alternatives.
Small Business Loans
There are many different types of small business loans. Traditional banks often look for an established track record before lending to a business, though requirements vary by lender.
You may be able to get a small business loan, such as a short-term loan, startup business lines of credit, invoice factoring, or equipment financing, from an alternative lender with only a short length of business history. You may receive smaller amounts and pay higher interest rates than more established businesses, however.
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Crowdfunding
On crowdfunding sites, anyone (not just professional investors) can contribute toward a new business project, product, or service. While it can take time and effort to create a compelling campaign, you typically don’t have to give up equity with crowdfunding. Instead, you may need to provide a token of appreciation to donors or investors, like early access to your product or a T-shirt with your startup’s logo on it.
Startup Loans
Startup business loans may not have the strict criteria for time in business that other business loans do, and you may be able to secure funds before you’ve even launched.
The U.S. Small Business Administration (SBA), for example, has a microloan program for small businesses looking to start or expand. Microloans are also available outside of the SBA program through nonprofit and for-profit lenders. Often, these lenders focus on serving low-income and underserved communities.
Recommended: Applying for a Microloan for Your Startup
The Takeaway
Pre-seed funding is a critical first step for many startups and may provide the financial support needed to turn innovative ideas into viable products or services. Funds can come from family and friends, crowdfunding, angel investors, venture capital, and small business loans.
Ready to grow your business? SoFi Small Business Loans can give you fast access to the capital you need. Check your eligibility in minutes.
FAQ
How are seed and pre-seed funding different?
Pre-seed funding may help a startup initially get off the ground. It comes in early, when the founder may have only a viable idea. Seed funding, on the other hand, is typically for a product that already exists and has some form of customer base.
How much money can you typically expect from pre-seed funding?
Pre-seed funding amounts vary widely, depending on the needs of the business and the investor. In late 2025, more than a third of pre-seed rounds raised less than $250,000, while 8% raised more than $5 million.
How much equity should you give away in pre-seed?
The amount of equity you give away in pre-seed funding may depend on your industry and how much you raise. Among U.S. startups on Carta that raised money through SAFEs in 2024, founders were set to give up a median of 3% of their company for rounds under $250,000 and about 12% for rounds of $500,000 to $999,999.
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