Definition
Pre-Seed Round
A pre-seed round is the earliest external funding a startup raises, often to validate an idea before a product exists.
Pre-seed capital usually comes from founders, friends and family, angels or accelerators, in small amounts, to build a prototype, test the concept and assemble an initial team. It precedes the seed round and is often raised on a SAFE or convertible note rather than a priced equity round.
Because the company has little to show, valuations are rough and risk is extreme. Pre-seed investors bet primarily on the founders. In India, the rise of micro-VCs and accelerators has made pre-seed a more formalised stage than it once was.
Related terms
- Seed RoundA seed round is the first significant equity funding a startup raises to build its product, hire a core team and find product-market fit.
- Angel InvestorAn angel investor is a wealthy individual who invests their own money in very early-stage startups, usually in exchange for equity or convertible securities.
- SAFE NoteA SAFE (Simple Agreement for Future Equity) is an instrument by which an investor gives a startup money now in exchange for equity in a future priced round.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.