Pre-Seed
Also known as Pre-Seed Funding, Pre-Seed Round, Friends and Family Round
Pre-seed is the earliest institutional financing round, typically raised before product-market fit on a SAFE or convertible note rather than priced preferred stock. The round funds team-building, a wedge product, and the path to a priced seed.
In depth
Pre-seed sits between angel capital and the first priced round. It exists because the cost of starting a software company keeps falling while the bar for a seed has risen: a modern seed typically expects a working product with real users or early revenue, so founders need a bridge to that milestone. Pre-seed fills the gap.
The instrument is almost always a SAFE or convertible note, not preferred stock. The post-money SAFE with a valuation cap (and no discount) is the dominant structure where SAFE-style instruments are permitted; equivalent convertible notes serve the same function in jurisdictions where the SAFE form is less common. The cap fixes the conversion price at the next priced round and acts as a soft valuation.
Pre-seed funds underwrite team, market, and wedge, not metrics. Many pre-seed companies have no revenue and sometimes no product. Founders coming out of senior roles at established companies or research labs often close on pitch decks alone.
Why it matters
Pre-seed is the highest-risk slice of venture and also the most opaque. Many rounds sit below the disclosure thresholds of local securities regulators, market data providers cover only a fraction of them, and SAFE caps do not show up cleanly in cap-table data until conversion. Founders frequently raise pre-seed without realising how much dilution stacks across multiple SAFEs once the priced seed lands.
For investors, pre-seed is where the asymmetry lives. A small check at a low cap returns the entire fund if the company reaches a unicorn-scale exit. The trade-off is mortality: most pre-seed companies do not raise a seed, and many fail before any priced round happens.
Worked example
A founder raises $1.5M on a post-money SAFE at a $12M cap to build the first version of a product. Twelve months later the company closes a $4M priced seed at $20M post-money.
Pre-seed dilution: $1.5M / $12M = 12.5%
Seed dilution: $4M / $20M = 20.0%
Combined post-seed founder ownership ≈ 1 × (1 - 0.125) × (1 - 0.20) = 70.0%
Founder ownership after both rounds lands near 70% before option pool top-up. A standard 10% option pool refresh at seed would drop that to roughly 63%. Stacking a second pre-seed SAFE at a lower cap, common when founders extend the runway, would compound dilution further.
Frequently asked
How much do startups raise at pre-seed?
Most pre-seed rounds fall in the hundreds of thousands to low single-digit millions of dollars (or local-currency equivalent). Reported median SAFE valuation caps scale with round size, from single-digit millions for the smallest rounds up to the mid-teens of millions for rounds approaching the seed boundary. Round size above roughly $2-3M is increasingly common but often gets labeled as seed rather than pre-seed.
What milestones do I need to raise a pre-seed round?
A defensible team, a clear thesis on the problem, and some early validation: a prototype, design partners, a waitlist, or domain credibility. Most pre-seed investors fund the team and the wedge, not metrics. Teams are usually small (two to three founders), and some companies raise before any product exists when the team's track record warrants it.
How much dilution should I expect at pre-seed?
Dilution scales with round size relative to the valuation cap. A small SAFE at a high cap can dilute founders by less than 10%; a larger pre-seed approaching $2-5M typically sits in the 15-25% range. Stacking multiple SAFEs at different caps can compound dilution unexpectedly when they all convert at the priced seed.
SAFE or priced round at pre-seed?
A post-money SAFE with a valuation cap (no discount) is the dominant structure globally where SAFE-style instruments are permitted. Priced preferred-stock rounds at pre-seed remain rare because legal cost is a meaningful fraction of a small raise. Priced rounds typically appear once round size crosses the low single-digit millions.
Who leads pre-seed rounds?
Dedicated pre-seed funds, scout programs from larger firms, angels, and accelerators. Multi-stage funds occasionally write pre-seed checks to claim early access. A named lead is uncommon at pre-seed; founders often raise from many smaller checks on a shared SAFE or note.