When seeking pre-seed funding, you ideally need to try to secure funding from your own bank account or through friends and family.
Although the amount of funding that can normally be obtained at this time is not very much, it should help to persuade certain individuals close to you to assist with your start-up idea.
Before approaching prospective investors, it is advised that you draw up an email list of individuals that you can approach.
Directly after prospective investors respond to your emails you should try and arrange a meeting. This will be when you have an informal chat and discuss your pitch.
The key element to presenting a successful pitch for pre-seed funding is to firstly introduce yourself to the investors prior to presenting your start-up idea.
Additionally, you need to be able to identify any co-founders who will be able to assist in running your business. It is advised that you demonstrate to the investors that you are able to develop your idea, as well as create an alternative (if your first idea is not successful).
An ideal way to pitch your start-up is to be yourself and lead with some data and insights.
Regardless of who you meet with for pre-seed funding, these meetings are important as these contacts can introduce you to additional investors.
Furthermore, besides the base requirements, pitching your start-up for pre-seed funding is not as daunting as pitching your business to a venture capital company for series A, B or C funding.
The impact of pre-seed funding
Pre-seed funding draws breath from helping start-ups with the inner workings of their business. If you need to recruit a few people to assist in managing the business or you need specific equipment for the product development, then pre-seed funding will provide you with the funds.
In addition to this, funding will help to formulate your small business and turn your product idea into a viable business.
Occasionally, entrepreneurs are in a position to self-fund without having to communicate with outside investors.
If you are only seeking between £5,000 and £20,000 to develop your idea, it is reasonable to say that outside investors may not be necessary.
Nonetheless, pre-seed funding is an ideal way to progress to the point where you can begin carrying out market research and building the product.
The people who provide pre-seed funding do not anticipate rapid returns, which can be extremely beneficial at the beginning of any start-up.
Is pre-seed funding right for me?
In order to determine whether pre-seed funding is right for you and your business, you will need to firstly identify your funding needs.
Some of the factors that you should consider include:
- If you are already developing a minimum viable product that shows elements of function, pre-seed funding may assist in developing it further.
- If you are convinced that your product can rapidly disrupt a specific market, it is possible you are prepared to look for funding early on.
- Do you wish to recruit a few employees to assist you with your start-up idea? If the answer is yes, you will need a small amount of funding to persuade these individuals to resign from their current jobs.
- If the procedure of creating a minimum viable product is proving to be expensive, you will undoubtably need to consider pre-seed funding to assist you in reaching the next stage.
If any of these aspects relate to you, there is no excuse not to consider pre-seed funding.
Although funding may be suitable for your business, you may be prepared to conduct market research and product development prior to applying for seed funding.
Raising a pre-seed funding or seed funding for your start-up
At the point of raising your pre-seed funding and seed funding for your start-up idea, you will be able to put your start-up in motion and begin to visualise the expansion potential for your business.
Pre-seed funding gives your business the base operation and enables you to gain results from the funding you received. This should be apparent from the onset of the development of your minimum viable product.
At the same time, the funds you receive may also help with further product development. This may then help secure future funding.
Furthermore, other elements deriving from this funding stage can consist of identification of market opportunities for recruitment. Once you proceed to seed funding and have enough funds, you will be compelled to finance additional product development and market research.
Although, you may not get any profit at this stage, you should be able to show some revenue gains.
Furthermore, you are more likely to have a team assisting you with the product development.
Be mindful that seed funding generally happens after you have a minimum viable product.
This funding can be utilised to turn a minimum viable product into a product that’s available to be released onto the market.
Once you have gained the amount of pre-seed funding and seed funding that you require to develop the basic elements of your start-up, you will have the opportunity to look at additional funding runs.
Those which include series A, series B and series C funding. If you have been considering how to turn your start-up into a business that earns money and makes a profit, then series A funding is ideal.
The majority of start-ups raise around £2-15 million pounds during the course of this funding round.
In regard to series B funding, this is perfect for businesses that have a viable product and want to increase their market reach. The funding is generally used for supporting business development, sales, tech, support and marketing efforts.
Lastly, series C funding is created specifically for the scaling of a company. If you wish to move into a new market, this round of funding is ideal for you.
An Alternative Route to Secure Pre-Seed Funding
Providing you are still working on the initial stages of development and growth of a start-up, a perfect way to keep costs low, while seeking funding is to use a start-up incubator. This will equip you with opportunities to gain low priced rental space, resources and all you need to carry out product development and market research.
If you would like to discuss your tech start-up idea and take the next step into getting your business funded, contact us today!
Call us on 0203 150 0565 or email info@thealtitudeagency.com.
