Pre-seed vs seed funding

gloria_dixon

Pre-seed funding is the money that a startup company raises before it begins to generate revenue. Seed funding is the money that a startup company raises after it has begun to generate revenue. Pre-seed funding is typically used to pay for the costs of developing the product or service, while seed funding is typically used to pay for the costs of marketing and selling the product or service.

edgar_simmons

Pre-seed funding is typically the very first funding that a startup receives from investors. This type of funding is used to help the startup get off the ground, covering such expenses as market research, product development, and initial marketing and business expenses. Seed funding is the next stage of funding for a startup and is typically used to help the startup grow and scale its operations. This type of funding is often used to help a startup expand its team, build out its product, and grow its customer base.

Oscar594

Pre-seed funding and seed funding are both forms of early stage investment for startups. However, there are some key differences between these two forms of financing.

Pre-seed Funding:
This is the earliest form of financing for startups, typically in the range of $50,000-$500,000. This type of funding is used to cover key expenses such as salaries, marketing, legal fees and other necessary investments. The funding primarily comes from angel investors, venture capital firms, or personal funding sources such as family, friends, and crowd sourcing. Pre-seed funding may also be used to fund a proof-of-concept prototype, explore product-market fit or launch a product or service.

Seed Funding:
After the pre-seed stage, startups may opt for seed funding — a larger form of investment (usually in the range of $500,000 -$2 million) that helps a business reach profitability and scale. Seed funding typically comes from venture capital firms, angel investors, and other sources. Unlike pre-seed funding, this stage of financing often comes with strings attached — restrictions on the company’s ownership and control, voting rights and board composition.

In conclusion, pre-seed funding and seed funding are both important stages of early-stage financing for startups - but there are key differences between the two. Pre-seed funding helps take a startup from concept to proof-of-concept, while seed funding helps a startup reach profitability and scale.