Glossary

Pre-Seed Funding

Definition

Pre-seed funding refers to the initial stage of funding for startups. It is usually provided by angel investors or friends and family who believe in the potential of the startup. The main purpose of pre-seed funding is to help cover the initial expenses and support the development of a minimum viable product (MVP).

What is the difference between pre-seed funding and seed funding?

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Pre-seed funding is the earliest stage of funding, while seed funding typically comes after the pre-seed stage. Pre-seed funding is used to cover initial expenses and develop an MVP, while seed funding is usually used to scale the startup and expand its operations.

Who provides pre-seed funding?

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Pre-seed funding is commonly provided by angel investors, who are individuals with high net worth and a keen interest in supporting early-stage startups. Friends and family members of the founders also often contribute to pre-seed funding.

How much pre-seed funding do startups typically receive?

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The amount of pre-seed funding can vary significantly depending on the startup's needs and the investors involved. In general, pre-seed funding amounts are relatively smaller compared to later funding rounds. It is common for startups to receive funding in the range of tens of thousands to a few hundred thousand dollars.

What is a minimum viable product (MVP)?

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A minimum viable product (MVP) is a basic version of a product that is developed with the minimum features required to satisfy early customers and gather feedback. It allows startups to test their ideas, validate their assumptions, and make necessary improvements based on user feedback.

How can startups use pre-seed funding?

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Startups can use pre-seed funding to cover various initial expenses such as market research, product development, hiring key team members, and marketing efforts. The funding is crucial for startups to reach the stage where they can attract larger investments and further develop their products or services.

Is pre-seed funding the only source of funding for startups?

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No, pre-seed funding is just the initial stage of funding. Startups usually go through multiple rounds of funding, including seed funding, venture capital funding, and potentially even initial public offerings (IPOs) if they reach that stage. Each funding round serves a different purpose and helps the startup progress towards its goals. ‍

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