A Guide to Understand How Businesses Raise Pre-Seed Funding

Pre-seed investment has undeniably grown in popularity in recent years as the number of entrepreneurs has climbed. Because of its importance in early-stage product and service development, pre-seed financing might be the make-or-break moment for any firm. That is why, rather than focusing solely on obtaining startup funding, it is vital to assess the factors that will enable entrepreneurs to set expectations for future rounds of funding and establish a long-term relationship with investors.

Subang Jaya – 11 February, 2022 – Many entrepreneurs and investors refer to pre-seed investment as a β€œfriends and family” round. While firms may seek venture capital, particularly if they have prior experience starting enterprises and have established relationships with investors, this is the first money you muster. In order to raise pre-seed funding, startups need to know exactly what their financial and business goals are. This includes the required cash, the entire cost of the firm, and an estimate of how much it can make in the future. They must also distribute funds to the proper resources for their activity before receiving them. It’s vital to finish all documentation for pre-seed investment ahead of time so that there are no delays if investors decide to contribute. Do considerable study on the pre-seed investor environment and the top investors before making your pitch. All legal and regulatory documentation, such as partnership agreements, incorporation papers, and necessary certificates, is required for startups. The next step is to put together a pitch deck and finalise a business strategy, as funding may come from unexpected places at this point, and even random phone calls might lead to a fundraising round.

The amount to be raised at the pre-seed stage is determined by how much pressure founders want in their startup. If a startup receives too much money at this stage, the investment terms will automatically increase, and additional diligence will be required. Investors will adjust the calculation upward if a company receives more financing than it needs. This can put a strain on businesses because if things go wrong and they need to seek money again, their valuation will be reduced, potentially harming their reputation, business, and future rounds. Overfunding can also lead to sluggishness and wasteful spending. The magnitude of the pre-seed investment will decide the company’s next steps, such as expanding its workforce, producing a new product, or increasing sales in specific channels.

There are a few signs determining if a firm is ready to raise a pre-seed round,=. For example, have an MVP that is gaining traction, have a solid founding team and have started the process of getting customers to use the product or service. Startups should also need to look for investors and funds that are interested in pre=seed investment for companies. Pre-seed funding investors can be divided into three categories: angel investors, accelerator and pre-seed and seed investment venture capital funds.Β 

Because of its importance in early-stage product and service development, pre-seed financing might be the make-or-break moment for any firm. That is why it is vital to assess the factors that will enable entrepreneurs to set expectations for future rounds of funding and establish a long-term relationship with investors.

To read more about these insights, visit us at Nexea InsightsΒ 

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About NEXEA

NEXEA is a Malaysian Venture Capital and Startup Accelerator firm that specializes in supporting and funding technology companies that have the potential to be the next technology giants. NEXEA also has services for investors and corporations that want to invest or work with future technology giants.Β 

NEXEA is known for its mentors who are successful ex-entrepreneurs, or C-levels who own or have sold (IPO, M&A) their businesses. The combination of experienced mentors, experts, and partners prove potent as the top companies out of 35+ startups invested by NEXEA have grown 3 to 16 times per year. NEXEA is based in Bandar Sunway, Selangor.

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