What is a pre-seed round and who invests in it?
Short answer
A pre-seed round is the earliest outside money a startup raises, often before it has real revenue. The checks usually come from founders, friends and family, angel investors, small early stage funds and accelerators. One angel I interviewed invests almost only at seed, so pre-seed money often comes from people who know the founder well.
Where pre-seed sits in the funding order
Pre-seed comes before the seed round. The company may be an idea, a prototype or a small test with a handful of users. The checks are small compared with later rounds. Dollar amounts and terms change from market to market. Many early rounds use SAFEs or convertible notes. Many sponsors talk to a securities attorney about whatever paper they use.
The people who usually write the checks
- Founders, who often fund the first work themselves
- Friends and family who know the founder personally
- Angel investors, who invest their own money
- Small early stage funds and accelerators
- Angel group members, who decide deal by deal
In my interview with Thomas, he explained that his angel group does not invest as a group. The members invest individually. He also said angel clubs are mostly built to look at operating businesses. Family offices sometimes join these rounds too, often as angels or co-investors.
This angel investor explains which stage he invests in and what traction he wants to see.
Summary and key takeaways from this video
"I usually exclusively invest at the seed round. There are some exceptions, but mostly at seed round."
He told me he wants either a revenue figure or, with no revenue, a hundred thousand daily active users. That is a lot to ask of a company at the pre-seed stage. It shows why pre-seed capital tends to come from a smaller and more personal group. He also said about 1 out of every 10 of his investments at a five or ten million dollar cap has turned into a unicorn. That was his own account, so treat it as one investor's record.
What I learned raising early money from my own network
I stumbled into angel investing. A friend who was CFO of a blockchain technology company told me they were doing their seed round. He asked whether my investors were interested in angel deals. I did not assume they would say no. I said I would put money in and asked who else wanted to join.
I describe how we raised money for early rounds from our own network.
In six weeks we raised a little over 600 thousand dollars to be a major investor in that seed round. We did the same thing again with a CBD cream company. Those were seed rounds, not pre-seed. The lesson carries over. Do not decide for investors that they are not interested. Ask them.
Before you approach anyone
Many founders talk to a securities attorney before approaching anyone.
From my books and event talks
When I put money into an early company, the first thing I look for is absolute trust in the founder. That comes from their experience and from how long I have known them. I knew the people behind Basalt Manufacturing for six or seven years before I wrote a check. After they doubled the size of the business, I invested a second time. At pre-seed there are no metrics to lean on, so a long relationship does the work that data does later. If you are raising, start with the people who already know your track record.
"First is absolute trust in who the founder is, usually in their experience, how long I've known them. The Basalt Manufacturing Company, I knew them for six, seven years before I made the investment, and then did a second round of investment after they doubled the size of the business."
Key facts
- One angel I interviewed said he invests almost exclusively at the seed round, with a few exceptions.
- The same angel said about 1 out of every 10 of his investments at a five or ten million dollar cap level has turned into a unicorn.
- My network raised a little over 600 thousand dollars in six weeks to be a major investor in a seed round.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Super Angel Investor Mandate Interview, Top 3 Insights on Structuring Investments - PODCAST - Family Offices & Family Office Club. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around offering exemptions, SAFE and note documents and investor verification rules. Do not use AI to write your own legal agreements.
What to do next
- 1Write down how far the company has really come, such as prototype, users or revenue.
- 2List the founders, friends, family and angels who already know you.
- 3Many sponsors talk to a securities attorney about how to structure the round.
- 4Ask each person directly instead of guessing who is not interested.
- 5Track which investors say they prefer seed, and come back to them with traction.
Follow-up questions
Is pre-seed the same as seed?
No. Pre-seed comes first and is usually smaller. Seed investors often want to see revenue or user numbers, as the angel in my interview described.
Do angel groups invest as a group?
Thomas said his group does not invest as a group. The members decide for themselves which deals to back.
Can family offices invest in pre-seed rounds?
Some do, often as angels or co-investors. My own network got into early rounds this way, but those were seed rounds.
Related questions
- How do I negotiate valuation with an early investor?Start with a valuation you can defend with traction and numbers, then expect the investor to push back.
- How do I raise capital from Middle East investors?Start with a warm introduction from someone the investor already trusts.
- How do I value an early-stage company with no revenue?You value it on proof instead of earnings.
Work through it with the investor meeting follow-up checklist. See all capital raising mindset resources.