By Sergio Paluch, General Partner, Beta Boom · Updated October 2026
Before we invest at pre-seed, we look at these six things.
We wrote this guide because we couldn't find a clear, complete resource on pre-seed funding when we needed one. As new founders, we didn't understand the jargon or how startup funding worked.
This guide explains how pre-seed funding works and what it takes to raise it, in plain English.
We wrote this guide because we couldn't find a clear, complete resource on pre-seed funding when we needed one. As new founders, we didn't understand the jargon or how startup funding worked.
This guide explains how pre-seed funding works and what it takes to raise it, in plain English.
If you're a new founder, or an experienced one who still has questions about pre-seed funding, this guide is for you.
The pre-seed stage is the earliest phase of startup financing, typically used to validate an idea, build an initial product (MVP), and test early market demand. At this stage, startups often have little to no revenue and rely on founder capital, angel investors, or pre-seed funds. The primary goal is to demonstrate enough traction or proof of concept to justify raising a larger seed round. Roughly 45-55% of startups that raise pre-seed capital go on to raise a seed round.
At this stage, the goal is to reduce uncertainty. Founders use pre-seed funding to test assumptions, build an MVP and gather early user feedback. Scaling comes later.
Common sources of pre-seed funding include friends and family, angel investors, accelerators and pre-seed venture funds. Each offers different amounts of capital, support and involvement.
Pre-seed rounds continue to get bigger. Pre-seed rounds typically range from $100K to $2M or more in 2026 depending on progress, team and vertical. In fact, we are now seeing pre-seed rounds in the $5M-10M range although that is quite rare. This is in stark contrast to the recent past, when pre-seed rounds were usually under $1M. Smaller rounds that are sub $500K are often referred to as “angel rounds”
At Beta Boom, for example, our average check at pre-seed is between $350K and $700K. For seed rounds, we may invest a bit more depending on the opportunity.
The predominant investment instrument (agreement) at the pre-seed stage are SAFEs, or Simple Agreement for Future Equity agreements. These investment documents are essentially warrants that promise investors a certain amount of equity at predetermined events such as a priced investment round, acquisition, or initial public offering (IPO).
The key economic terms contained in SAFEs are valuation caps and discounts. Valuation caps essentially determine how much equity the investor will receive based on a sort of virtual valuation. Discounts also determine how much equity the investor will receive if the valuation cap is not triggered, usually because the valuation at a priced round or sale is lower than the valuation cap.
At the pre-seed stage, you don't need a finished product. You do need to show a meaningful problem, a compelling solution, early validation (research, a prototype or initial users) and a founding team that can execute.
Pre-seed focuses on testing and validating the idea.
A seed round is the first institutional round of funding that follows pre-seed. It is used to scale early traction, hire key team members, and further develop the product. Unlike pre-seed, seed rounds often require substantial customer and market validation. Only about 15-20% of companies that raise seed capital go on to raise a successful Series A round.
The pre-seed stage is usually when a startup validates that its product is useful and that customers will pay for it. That looks different by industry.
In some industries, a company can build a prototype and test it with little or no funding. In others, particularly ones that need a lot of research and development, pre-seed might mean in-depth customer research, with no prototype at all.
Companies that have shown some customer adoption and revenue usually go on to raise a seed round. The bar for seed funding varies a lot by industry and by the founding team.
For example, a company in a less popular vertical, led by founders without big-name technical credentials or a top-ten degree, might need $500K in annual revenue growing 30% month over month. A company in a hot vertical with high-pedigree founders might raise a large pre-seed round on just an idea.
Before pre-seed, most startups go through two or three earlier stages: idea, friends and family, and angel.
The idea stage is when founders shape a solid product and business idea. They might do a lot of market and customer research to sharpen it.
The friends-and-family stage often comes next. Founders turn to friends, family and colleagues to raise a small amount of money to build a simple prototype or test the concept further. Many founders don't have friends or family who can invest much at this stage.
As the idea gets more refined, founders might raise a small angel round. That money usually goes toward improving the product and starting to sell it. Angels also invest at later stages, including seed, Series A and beyond.
Pre-seed investors want to make money from their investment, and a lot of it. To do that, they balance risk and reward.
On the reward side, they look for companies that can serve huge markets, charge a lot for their product, or ideally both.
On the risk side, they try to limit the chance that the company will fail. This usually comes down to a few broad areas.
Investors look for founders who are likely to succeed. Many use pedigree as a shortcut: a Stanford or Ivy League degree, or past jobs at companies like Google, Apple, Amazon, Goldman Sachs or McKinsey.
We don't. In our experience, pedigree says little about whether someone can build a company. We look at how well you know the problem and what you've done with the resources you have.
Our decisions are based on the market opportunity, traction, whether the business meets our investment criteria, and whether we believe the founding team brings the right skills to execute.
Every startup seeking pre-seed investment is competing with others. Investors see plenty of opportunities, but they have limited capital, and most early-stage startups fail.
There's no fixed bar to clear. Your company has to look like the best investment out of dozens or hundreds of others.
At the pre-seed stage, investors look at things like:
Your goal is to score as high as you can on each one.
You don't need any money to start validating your idea. Investors want to feel confident your solution has potential. Without that, they're betting on something with no evidence it will work.
Almost every problem already has some kind of solution, and almost every startup has competition. Sometimes a lot of it.
That isn't a bad thing. Plenty of huge companies were built in crowded markets. There were lots of messaging apps before Slack and dozens of scheduling tools before Calendly. Each one won because of the specific way it solved the problem.
Tope Awotona, the founder of Calendly, spent six months using almost 30 existing scheduling tools. He tried every feature, read every support article, studied every review and even contacted each company's customer support. By the end, he knew exactly which features to build and how to present them. Calendly went on to be valued at $3 billion.
A surprising number of founders never talk to a single potential user. They assume the idea is great and start building, or go straight to raising money.
Investors notice. It's rare to get a product right from imagination alone, and it's fairly easy to test and refine your idea by talking to the people who have the problem.
Focus on the details. Assume other companies are solving the same problem, and find out what would make your product better for these users.
There's no magic number, but many founders speak to at least 50 to 100 potential users. Other founders are doing this work too, so if you've only spoken to five, investors will notice the gap.
Would you be more convinced if I told you people like my product idea, or if I showed you data that they use it every day? I pay much more attention to founders who can show the second.
Research is useful, but real usage of a real product is stronger evidence. That's why you should build an MVP if you can.
Some products, like a self-driving car, take a long time to build. Most founders, though, are building mobile or web apps, and you can often build a low-code or no-code prototype in a weekend. If you're building an app, it's worth getting some usage data before you raise.
If your app is a bit more complicated, you might want to hire an offshore engineering firm.
When you launch a company, your team needs to cover at least these areas:
Investors will want to see that your team can move quickly across all of them.
That doesn't mean you need co-founders. You might not want co-founders. There are other ways to build a team, such as part-time help, advisors paid in equity and offshore talent.
Bringing on a co-founder is a big, risky decision. Co-founder conflict is one of the leading reasons startups fail, and research shows single founders tend to do better than multi-founder teams.
Many VC investors only back teams with two or more founders. I'd encourage you not to take on a co-founder just for that reason.
Your pitch deck is the main way you'll present your company to investors, so it's worth the time to get it right.
A good pitch deck usually has these slides:
You don't need to follow this exact order, and you might leave some slides out. Use it as a starting framework.
Investors see hundreds, if not thousands, of pitch decks. A good story is one of the best ways to stand out. Having seen thousands of decks myself, very few are more than a collection of facts.
The best story framework I've seen is StoryBrand, from Donald Miller's Building a StoryBrand. It works like this:
Your customer is the hero of your story, not you. Like every hero, she faces a challenge. If she fails, bad things happen. If she succeeds, her situation changes for the better. You, the company, are her guide. Your job is to give her a plan that gets her there. The book goes deeper, and it's worth reading before you write your deck.
Start when you can show real progress on the problem, the product and early customers. Our Pre-Seed Readiness Checklist is a quick way to check where you stand.
Give yourself time. Many founders expect that raising a pre-seed round will take a few short months, but the reality is that the entire process can easily take 6-12 months. You will greatly improve your odds of success the earlier you start and the more pre-work you do. It also helps to start building investor relationships months before you ask for money.
Look for investors who back companies like yours. Check four things for each one:
Our list of top pre-seed funds is a good place to start. If you're building in a specific industry, see our pages on cybersecurity and healthcare investing. Chapter 6 covers more investor databases.
Warm introductions work much better than cold emails. Founders an investor has backed, accelerator programs and other investors are usually the best sources.
Treat fundraising like a sales process. Here's a simple way to run it:
Your pitch should explain the problem, your solution, the opportunity and why your team is the right one to do it. Keep it simple, especially for investors who don't know your space.
Investor meetings help you raise money and get feedback. Notice which questions and objections come up again and again, and use them to sharpen your pitch.
Once investors are interested, turn that interest into commitments. Most pre-seed rounds close on a SAFE, so agree on the valuation cap and any discount early. Keep in touch with every interested investor and move quickly, because momentum helps people make decisions.
After you close, your focus shifts to execution. Use the money to build your product, validate demand and hit the milestones you need for your next round.
If you're building in one of our sectors, tell us what you're building.
How you spend your investors' money is your call, but it isn't a blank check. Your next round of investors will judge, sometimes harshly, how you used your pre-seed money.
Future investors will want to see that your spending strengthened your product-market fit and grew your revenue. If you put a lot of money into marketing and revenue barely moved, they'll worry you'd waste their money too.
So build a plan with key milestones, when you expect to hit them and how you'll get there. The plan might change, but without one you're much more likely to waste money and lose momentum.
Work backward from where your business needs to be to raise the next round, probably a seed round. The right milestones depend on your industry and other factors. Ask your current investors, or seed investors you'd like to raise from, what they'd want to see.
To raise a seed round, you'll need to show strong revenue growth or strong user engagement. Spending that doesn't move you toward one of those is usually wasted.
You're also competing with lots of other startups. Some revenue or engagement isn't enough. Yours needs to look stronger than the other startups raising seed money at the same time.
If you don't hit strong milestones with your pre-seed money, raising your seed round gets much harder. Seed investors will find it hard to believe things will be different with their money.
The three areas where I've seen founders waste the most money are building products nobody asked for, obsessing over details that don't matter, and marketing that doesn't work.
Many founders go on long product-building journeys that eat up their cash and return very little. They don't talk to users or test designs or prototypes. They build whatever is in their head.
I've also seen many founders obsess over product details that don't affect engagement or revenue. There's no end to these details, and they can burn through a lot of cash.
The third pattern is spending big on unproven marketing, or on marketing before it's needed. One startup I know spent $250,000 of a $750,000 pre-seed round on a marketing agency that brought in a few hundred dollars of business. That's a hard story to tell a seed investor.
At pre-seed, marketing should start with small, careful experiments. I haven't seen a startup get its messaging and channels right on the first try. It usually takes months of testing to find the message that works and the channel (print ads, conferences, podcasts, Google ads and so on) that reaches your audience best.
A founder I know sold his last company for hundreds of millions of dollars. He's now launching a new startup and barely spending anything.
They have millions in the bank, but the three founders (a CEO, an engineer and a marketer) pay themselves minimal salaries. They won't increase spending until customers can't get enough of the product and their marketing clearly works.
Why? Because he's been through it. He knows that if they don't deliver results on this first round and run out of money, it's over.
Spend carefully, and don't run out of money.
Fundraising is sales, and good salespeople will tell you sales depends on relationships.
You're asking investors to make a purchase worth hundreds of thousands of dollars, maybe millions. In this case, they're buying shares in your company.
If you were making a million-dollar purchase from someone you'd barely met, you'd want to get to know them first. You'd also want to look closely at what they're selling.
After you raise your pre-seed round, start building your network of seed investors right away. That doesn't mean dropping everything to spend time with investors.
It means adding at least one seed investor to your network each week, and keeping in touch with them monthly or at least quarterly. A simple way to do this is to send a monthly update to your list of target seed investors and set up a quarterly call.
Investors want a return on their investment, and they don't want to lose it. They're always balancing risk and reward.
First, show that you can turn investment into progress. If you can't, seed investors have little reason to think you'll use their money well. Show that you've used past funding carefully and turned it into milestones and traction.
Second, show that you've built something people love. Seed investors' expectations keep rising. Raising a seed round on an idea alone is rare now. You need proof that at least one group of users is passionate about your product.
Third, show that people will pay for your product. Even when users love a product, getting them to pay can be hard, and that's a big risk for investors.
An advisor once told me you have to tickle an investor's greedy nerve. In other words, investors need to believe your company can make a lot of money and give them a big return. The best way to do this is to show growth momentum and explain how big your business can get.
To show momentum, share how much revenue you're making and how fast it's growing. If you don't have revenue yet, share usage and user growth.
Then size the opportunity. Work out how many customers you'd need, at your current pricing, to reach $100 million in annual revenue. Back it up with a detailed, realistic plan for getting there.
These customer and user research tools can help you understand user needs and start validating your idea.
Google Trends is a free tool that shows what people are searching for, so you can spot what's popular and where the gaps are.
SEMRush is built for search engine optimization, but it also shows what questions people ask about different topics.
AnswerThePublic is a free tool that shows the questions people ask about a topic.
Typeform makes customer surveys easy to build and easy to fill out. It also has advanced features like branching logic.
Lookback is a user research platform for running usability tests and customer interviews on mobile and desktop apps.
UserTesting is a usability testing platform that gives you a ready pool of people to get feedback from.
Crunchbase is a low-cost startup funding database and a good starting point for competitor research.
If you're building an app or platform, it's never been easier or cheaper to build a prototype. Here are some tools to get you started.
Figma is the standard tool for wireframes, designs and clickable prototypes for apps and software.
Bubble is a popular no-code app builder. There are many others with different strengths, but Bubble is one of the most well-rounded and well-supported.
UpWork is a place to hire app developers at a low cost. Quality varies a lot, but we know many founders who've found excellent, affordable developers there.
There are thousands of venture capital firms and hundreds of thousands of angel investors in the U.S. alone. These tools can help you find pre-seed investors who might be right for your startup.
Crunchbase is a tried-and-true database of investors, investments, and companies. Unlike other databases like Pitchbook and Prequin that can cost thousands or tens of thousands of dollars per year, Crunchbase has a reasonable monthly subscription fee ($49 monthly if billed for a year).
Signal is a newer investor database run by the venture capital firm NFX. Its investor lists are useful if you're looking for something specific, like pre-seed EdTech investors or funds that back women founders.
FounderSuite is a paid investor database with over 200,000 investors. It also lets you track investors in its CRM, host your pitch deck and files, and send emails. There's a free version too.
Apollo combines research, CRM and outreach. You can find investors' emails, track them and reach out to them in one place.
There are dozens of investor lists and databases. The hard part is choosing which ones to use, sorting through the investors and actually connecting with them.
What your pitch deck says matters much more than how it looks. Still, these tools can help it look good.
Google Slides looks basic, but you can make professional decks with it, and its collaboration features are excellent.
Canva makes good design easy, and it works well for pitch decks. Its large library of templates gives you a head start.
Slidebean is both a pitch deck design tool and a design agency. If you want expert help with design, it's worth a look.
New slide design tools keep appearing. Some use generative AI, others focus on design features. They're worth exploring, but remember that your content is what gets you investment. Design is a bonus.
Raising pre-seed capital and moving on to seed takes planning, focus and persistence. Two things hold true at every stage.
First, you're competing on two fronts: with other companies for customers, and with other startups for capital. Investors back the companies that grow fastest.
Second, it takes time to figure things out. It takes time to shape your product until customers love it, months to find a marketing or sales approach that works, and months to find investors and build relationships with them. Set realistic timelines and spend carefully until you hit a real growth or product milestone.
If you're not already doing it, talk to customers and users as often as you can, even several times a week. Learn everything you can about their needs, limits and preferences. That's how you build a product that stands out.
At the same time, start finding and getting to know investors. It takes most founders months to build a network big enough to raise from, so the sooner you start, the better.
Pre-seed funding is the earliest stage of startup financing. Founders use it to validate an idea, build a first product and test early demand, usually before they have much revenue.
Most pre-seed rounds range from $50K to $1M. Raise enough to hit the milestones you'll need for a seed round.
Pre-seed pays for testing and validating the idea. Seed is usually the first institutional round, and it pays for growing what's already working. Seed investors expect much more proof of customers and revenue.
Talk to customers, build an early version of your product and get some proof that people want it. Then make a list of investors who back your stage and sector, get warm introductions where you can, and keep your meetings close together. Chapter 4 walks through each step.
Friends and family, angel investors, accelerators and pre-seed venture funds. They differ in how much they invest and how involved they get.
Usually not. Most pre-seed rounds use a SAFE, which turns into shares when you raise a priced round later. You don't pay it back. Convertible notes are technically loans, but they also usually convert into shares.
The typical dilution range that I’m seeing as a VC investor is between 15-20% at the pre-seed stage. It used to be closer to 10% in the past when rounds were smaller, but now pre-seed rounds are essentially the seed rounds of 5 years ago. As pre-seed rounds got bigger, dilution followed. I will say, though, that you should try really hard to keep dilution to under 25% at the pre-seed stage.
For founders that have world-class experience as engineers or entrepreneurs (e.g. world-renowned scientist or $50M past exit), a pre-seed round might take a month or two. A startup that is growing 100% month-over-month in revenue might be able to raise a pre-seed in 2-3 months. All other pre-seed founders should expect their fundraise to take 6-12 months and sometimes longer.
The best time to raise is when you have a bunch of momentum such as early revenue, a bunch of design partners or pilot customers, are having tons of sales conversations, or your product usage is exploding. Score yourself with our Pre-Seed Readiness Checklist.
Beta Boom is a pre-seed and seed fund investing in startups solving complex workflows in enterprise, cybersecurity and health, led by pattern-breaking founders outside of Silicon Valley. Apply for investment
