The Importance of Pre-Seed Funding and Sharing Your Work in Public

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Sep 21, 2023
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The Importance of Pre-Seed Funding and Sharing Your Work in Public
Introduction:
Pre-seed funding and sharing your work in public are two essential aspects of startup success. In this article, we will explore the significance of pre-seed funding, its sources, and how it works. Additionally, we will delve into the benefits of sharing your work in public and how it can contribute to your personal and professional growth.
Pre-Seed Funding:
Pre-seed funding refers to the initial capital raised by startups to develop their early-stage product or idea. The funds are primarily used to hire talented engineers and acquire customers through marketing efforts. These rounds typically amount to less than $1M and are focused on turning an idea into a tangible product. It is crucial to note that timing plays a significant role in raising pre-seed funding. Avoid raising funds during end-of-year holidays and early summer when investors are often on vacation. It is also recommended to add a cash buffer of around 25% to cover unexpected costs that may arise during execution.
According to our research, the average amount raised in a pre-seed round by US startups is $626,360, while it is $538,108 for startups outside of the US. It is common to follow a framework of 12-18 months of cash runway with an additional 4 months buffer. Moreover, closing a pre-seed round can be a lengthy process, with founders attending an average of 26 investor meetings before securing funding. Patience and perseverance are key to success in this stage.
Investors are looking for proof of concept, a clear monetization plan, and references from potential customers. If you lack the technical skills to build a proof of concept, finding a technical co-founder can be advantageous. Additionally, investors often prefer founding teams of 2-3 individuals, as they are perceived as less risky than solo founders. Crafting a compelling pitch deck is crucial, as it is the primary tool to capture investors' attention during the short time they spend reviewing it.
Sources of Pre-Seed Funding:
Pre-seed funding can be acquired through various sources, including angel investors, venture capital firms, and accelerators. Angel investors typically invest anywhere from $1,000 to $1,000,000, with an average check size ranging from $25,000 to $100,000. However, it is important to ensure that your angel investors are accredited investors to avoid complications during future funding rounds.
Pre-seed venture capital firms can write larger checks, typically ranging from $100,000 to $1,000,000. Rolling Funds also provide pre-seed funding, with an average check size of $100,000 and a maximum of $1,000,000. Additionally, accelerators offer funding in exchange for equity, usually between 5%-10% of your company.
Equity crowdfunding platforms provide another avenue to raise pre-seed capital. Thanks to Regulation CF, startups can raise up to $5M per year from the crowd, including non-accredited investors. Platforms like Republic, Start Engine, and WeFunder allow startups to raise capital through small investments from a large number of individuals.
Sharing Your Work in Public:
Sharing your work in public is a powerful practice that can bring numerous benefits to your personal and professional growth. While some studies suggest that sharing goals prematurely may lead to a decrease in motivation, sharing progress can be highly motivating. By becoming a documentarian of your work, you can reflect on your progress and plan your next steps effectively.
Sharing your work in public also allows for an iterative approach, ensuring that your work aligns with the identified needs. It opens doors for collaboration and connection within a transparent community, increasing the likelihood of connecting your ideas with others. Through public sharing, you may find mentors or potential partners who share your interests and can contribute to your journey.
Working on ideas in isolation can hinder the creative process. Sharing your work in public may initially feel uncomfortable, but it becomes easier over time and enables you to connect with like-minded individuals. Joining online groups or attending meetups can help you find people who care about your work and provide valuable feedback and support.
Conclusion:
In conclusion, pre-seed funding and sharing your work in public are crucial elements for startup success. Pre-seed funding helps turn ideas into tangible products, and it can be acquired through angel investors, venture capital firms, accelerators, or equity crowdfunding platforms. Sharing your work in public allows for reflection, collaboration, and connection with others, ultimately enhancing your productivity and creativity. Before we wrap up, here are three actionable advice:
- 1. Research and identify the most suitable sources of pre-seed funding for your startup. Tailor your approach and pitch accordingly to increase your chances of securing funding.
- 2. Start sharing your work in public by documenting your progress and engaging with communities interested in your field. Seek feedback and build meaningful connections that can contribute to your growth.
- 3. Maintain a balance between sharing your work and actually doing the work. Ensure that public sharing aligns with your workflow and enhances your productivity rather than becoming a distraction.
Remember, the journey of entrepreneurship requires resilience, adaptability, and continuous learning. Embrace the opportunities offered by pre-seed funding and sharing your work in public to fuel your growth and success.
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