Stage
Pre-seed
The first outside money, usually raised before there is much product or revenue. It buys the evidence that makes a seed round possible.
Pre-seed is the first money a company raises from outside investors, usually before there is a finished product, often before there is revenue, and sometimes before the company has incorporated. The label is loose: one company's pre-seed is another's seed. What defines the stage is what the money is for: turning an idea and a team into enough evidence that more serious investors will fund the next step.
What pre-seed money pays for
- The founders' time. Modest salaries so the founding team can work full time.
- A first version of the product, built to learn from users rather than to scale.
- Customer discovery: interviews, pilots, design partners, early sales conversations.
- Company setup: incorporation, founder stock and vesting, IP assignment, a lawyer to paper the round. Getting these right now is cheap; fixing them during a later due diligence is not (see due diligence).
A useful test for the amount: what does it cost to reach the specific evidence a seed investor would need, plus a buffer for things taking longer than planned? The how-much-to-raise planner works through that from a hiring plan and burn.
Who invests at pre-seed
| Investor | What they usually look for | How they typically invest |
|---|---|---|
| Founders themselves | Conviction: their own savings or unpaid time | Founder stock (see vesting) |
| Friends and family | Trust in the founder | SAFEs or notes; often small checks. In the U.S., check whether they are accredited (see securities law) |
| Angel investors | Team, market insight, sometimes domain overlap with their own career | SAFEs most often; some angels invest through groups or syndicates |
| Accelerators | Teams they can help in a fixed program | A standard deal for a fixed percentage, usually on SAFEs |
| Pre-seed and early seed funds | A thesis fit; ability to lead or anchor a small round | SAFEs, sometimes a priced round |
| Grants and public programs | Technical or social merit against program criteria | Non-dilutive: no equity (see public funding) |
Accelerator terms are published and differ widely, so compare them as you would any investment. As one example of the structure, Y Combinator's published standard deal (checked 2026-10-26) is $500,000: $125,000 on a SAFE for a fixed 7% and $375,000 on an uncapped MFN SAFE that converts on the terms of the company's next SAFEs, plus a pro rata right. Other programs invest less or more, take different percentages, and some charge fees. The question is what the program's money, network and time are worth against the equity they cost.
Instruments
Most U.S. pre-seed rounds are done on post-money SAFEs: each investor signs and wires when ready, legal costs are small, and the founder knows exactly what each SAFE sells (amount ÷ cap). Convertible notes are the main alternative (compared here). Priced pre-seed rounds are less common because the legal cost is high relative to the amount raised.
Setting a valuation cap
A cap is a price. YC's guide suggests starting from the dilution you are willing to accept: if you want to raise a given amount and sell a given percentage, the post-money cap is the amount divided by the percentage. Raising $1 million while selling 15% implies a post-money cap of about $6.7 million. From there the cap is a negotiation, and what investors will accept depends on the team, the evidence, the market and the moment. We do not publish "typical" cap figures: they move with the market and vary by sector and region, and any single number would be out of date or misleading for your case. Recent reports from cap-table software providers and venture data firms are the closest public guide; read their sample and date carefully.
What to have before raising a seed round
There is no checklist that guarantees a seed round, but seed investors generally want evidence that reduces one of the big risks: that nobody wants the product, that the team cannot build it, or that it cannot reach customers at a reasonable cost. Pre-seed money should be spent on the evidence that matters most for your business, for example:
- A product in real users' hands, with usage you can describe honestly (retention, frequency, depth), not only sign-ups.
- Early revenue, paid pilots or letters of intent, if you sell to businesses.
- A clear account of who the customer is and how you reach them.
- A team that can build the next version without the founders doing everything.
- Clean company records: founder vesting, IP assignments, every SAFE and option documented.
Then plan the seed round so it starts while you still have months of cash left: raising usually takes longer than founders expect. The runway calculator shows when to start.
Sources
- The Y Combinator Standard Deal, Y Combinator. Cited for facts; not reproduced.
- Post-Money Safe User Guide, Y Combinator. Cited for facts; not reproduced.
- Accredited investors, U.S. Securities and Exchange Commission. Public domain (U.S. federal government work).