- Pre-seed funding: A startup’s guide to early-stage fundraising
- What is pre-seed funding?
- What is pre-seed funding used for?
- Pre-seed vs. seed funding
- When are you ready for a pre-seed round?
- How much should you raise at 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
- 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. It's the capital founders raise to turn a raw idea into a validated concept or minimum viable product (MVP), and it's almost always raised with convertible instruments like Simple Agreements for Future Equity (SAFE). 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 isn’t much consensus in the startup community about the exact definition of pre-seed funding.
While there's no single path, data from Carta's State of Pre-Seed 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.
With early-stage funding, 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.
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, likeSAFEs. 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. The goal is not to get lost in semantics, but instead provide 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 setup, including incorporation, legal fees, and establishing basic tech stack
Market research and customer identification
Protecting intellectual property, including filing for trademarks or patents
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
Knowing how pre-seed fits alongside the later startup funding stages shapes your milestones and your investor targeting. 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.
The distinction matters for strategic planning, especially in a tough fundraising environment where valuations are down and the lines between rounds can 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 (for example, ~$250,000-$1 million), though some rounds are smaller or larger | $500,000-$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 say yes to all of the following.
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 is uniquely positioned to succeed.
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.
How much should you raise at a pre-seed round?
There's no universal number, but most pre-seed rounds land between $150,000 and $1 million. Carta data shows the average instrument is $276,000, with 18% of rounds in the $1–$2.5 million range as of Q1 2026. The right amount is the one that buys you enough runway to hit your next set of milestones.
Aim for 12-24 months of runway. That's usually the window you need to build a product, validate demand, and reach the traction that leads to a seed round. Raise too little and you'll be back out fundraising before you have results to show. Raise too much and you may give away more ownership than the stage warrants.
Current data can anchor your target. In Q2 2026, the average pre-seed instrument on Carta was $276,000, a record high and up 27% year over year, according to Carta's State of Pre-Seed report. Few pre-seed deals exceed $2.5 million, at least in the U.S., so a round in the low-to-mid six figures is well within the norm.
Work backward from your plan. List the milestones that make you fundable at seed, such as a shipped MVP, early users, and key hires, then estimate the cost and timeline to reach them. Add a buffer for the fundraising process itself, which can take months. The figure you land on is your target raise, grounded in a plan rather than a round-number guess.
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 comfortable with a level of risk and ambiguity that comes with backing an unproven idea.
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.
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. 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, meaning the investor brings expertise and connections in addition to capital.
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.
While accelerators typically 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 startup founders during the early stages of company building, as well as mentorship, networking, and sometimes funding. Some incubators are geographically based nonprofits, hoping to support promising 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 develop 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 successful venture studio 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, 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.
Raising a pre-seed round requires more than a good idea. Demonstrating professionalism early gives investors confidence before you've shipped a product. Here's how to get investor-ready, step by step.
Step 0: Preparing for funding
There’s no single path to raising capital, but here are some steps to take to optimize your ability to raise pre-seed funding
Get to know fellow founders. Fundraising is a long process, and building a network of fellow founders going through the same thing provides tactical advice, warm investor introductions, and a sounding board when things get hard.
Know the fundraising market. Information asymmetry between founders and investors is real. Know the data and trends on valuation and round size for your stage and vertical before you start pitching.
Network with potential investors before you raise. Once term sheets start coming in, you'll want to move quickly to close. Meet investors before your official raise, seek their feedback on your pitch, and stay in touch so you're not starting from zero when the time comes.
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 is your cap table, and it's the foundation of any fundraise.
Relying on spreadsheets for equity management creates real risk. Mistakes discovered during due diligence inflate legal costs and delay closing. Version control issues, hidden formula errors, and disorganized records can kill a deal.
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 often matters more than a detailed financial model. Your pitch should focus on the narrative: why the problem matters, why now, and why you. The pitch deck is the visual aid, not the story itself.
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. Research and target investors with a track record of pre-seed investing in your industry who have backed companies with a similar business model.
Whenever possible, seek warm introductions through your network. They provide social proof (credibility signals that tell other investors your network already believes in you) and get you past gatekeepers. Use initial meetings to gather feedback and build relationships rather than going for a hard sell immediately. The goal is to find investors who have faith in what you're building and can offer 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.
Most pre-seed rounds are raised using convertible instruments, which include SAFEs and convertible notes. In fact, these unpriced instruments have become the default for a company's first fundraise. Carta’s latest State of Pre-Seed report shows that SAFEs made up 93% of pre-seed rounds in Q2 2026.
Understanding SAFEs and convertible notes
Convertible instruments like SAFEs and convertible notes 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 neither debt nor current equity, but a contractual right to receive equity when a future priced round occurs.
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
Many founders worry about how much of their company they're 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 a term in a contract that only comes into play when a future event occurs.
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 helps you negotiate better terms and understand the true cost of the capital you're raising.
Common pre-seed fundraising mistakes to avoid
For first-time founders, it's easy to make missteps during your first fundraise. Here are the most common pitfalls and how to avoid them.
Not having a clean cap table: 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.
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 fourth quarter of 2025 was roughly 19-20%, 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 long does a pre-seed round take?
While some rounds close quickly, most take several months from first conversation to funds in the bank. 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 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 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
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