Every startup story begins before the spotlight: at the stage where the product isn’t built, revenue doesn’t exist, and the only thing a founder can lean on is their ideas. Pre-seed capital is the fuel for that moment. It’s the check that lets founders turn sketches into prototypes, conversations into customer discovery, and a team into a company. Below, we’ll explain how pre-seed capital works, who provides it, and how to use it well.

What’s in this article?

• What is pre-seed capital?
  
• How does pre-seed capital differ from seed and Series A funding?
  
• Who provides pre-seed capital to startups?
  
• What types of businesses typically raise pre-seed funding?
  
• How do founders use pre-seed capital effectively?
  
• What challenges do startups face in raising pre-seed funding?
  
• How do investors evaluate startups at the pre-seed stage?
  
• How Stripe Atlas can help
  

What is pre-seed capital?

Pre-seed capital is the money a startup raises at its earliest stage. It’s often the “first check-in” before any formal seed round. At this point, the company is usually little more than a concept, prototype, or side project, and it’s frequently before any revenue is earned.

Funding at this stage often comes from founders’ savings, friends and family, or early angel investors. Deals are typically done with convertible notes or simple agreements for future equity (SAFEs) since setting a valuation this early is difficult.

Because pre-seed capital is raised at such an early stage, these rounds are usually small: a few hundred thousand dollars up to a million. The median pre-seed SAFE raise amount was about $700,000 in 2025.

How does pre-seed capital differ from seed and Series A funding?

Startup funding occurs in stages. Pre-seed, seed, and Series A represent different levels of maturity, risk, and expectations.

Here’s a closer look at each stage:

• Pre-seed: This is the very first outside money. It’s usually tens of thousands to a few hundred thousand dollars, and it often comes from friends, family, or angel investors. Deals are typically SAFEs or convertible notes. At this point, startups are generally in the pre-revenue stage, and the goal is to build a prototype, test the idea, and prove the founders can execute.

• Seed: These rounds often gather between $500,000 and $5.0 million. In 2024, the median amount fundraised in seed rounds was $3.5 million. At this stage, there’s usually a minimum viable product (MVP) and early user activity. Sometimes structured as priced equity rounds, funding might come from angel groups, seed venture capitalists, or accelerators. Seed capital helps a team finish the product, attract customers, and validate a business model. Investors expect to see evidence of early traction.

• Series A: This is often the first “institutional” round, typically bringing in between $5 million and $30 million (sometimes more). Startups here are growing their revenue, user adoption, or other key performance indicators. Deals are usually priced equity, led by larger venture firms. Series A funding is about scaling—hiring at pace, expanding markets, and pushing for sustainable growth.

Who provides pre-seed capital to startups?

Pre-seed funding is small, risky, and personal. Founders frequently put in their own savings first and might raise funds from friends and family next. It works for some founders, but not everyone has access to wealth in their network.

If friends and family aren’t an option and personal savings are spent, pre-seed funding might come from these sources:

• Angel investors: Experienced entrepreneurs or executives might invest their own money. Angels might write checks for a few thousand to a couple hundred thousand dollars. Beyond capital, they often provide mentorship and industry connections.

• Syndicates and networks: Angels sometimes pool their resources to create larger checks. Platforms like AngelList or regional angel groups make it easier for startups to pitch once and reach multiple investors.

• Incubators and accelerators: Programs like Y Combinator and Techstars combine modest funding with mentorship, a structured program, and access to a network of investors. Acceptance into a respected accelerator can offer both capital and credibility.

• Pre-seed venture funds: These are small, professional funds that specialize in writing the very first check and helping startups prepare for a seed round.

• Crowdfunding and grants: Some early ventures raise funds through equity crowdfunding platforms or product campaigns, which can double as early marketing. Others receive nondilutive funds from competitions or government grants, especially in fields such as biotech and deep tech.

What types of businesses typically raise pre-seed funding?

Pre-seed capital usually flows to ventures that need up-front money to prove a big idea. Those often include these types of businesses:

• Software and software-as-a-service (SaaS): The costs to build these companies are relatively low. Founders raise small checks to hire developers, build an MVP, and test early adoption.

• Marketplaces and customer apps: Two-sided platforms and lifestyle apps often need capital to build the first version and attract initial users.

• Hardware and Internet of Things: Physical products require early spending on prototypes and manufacturing.

• Biotech and deep tech: High up-front costs for research and development mean these companies often pair pre-seed checks with grants or university funding to prove feasibility.

• Consumer products and ecommerce: Founders use pre-seed funding to move from an idea to the first production run, or to fund initial marketing.

How do founders use pre-seed capital effectively?

Pre-seed funding is usually modest so how it’s spent can determine the company’s trajectory. The goal is to hit the milestones that will make seed investors take you seriously.

Founders should focus on the following:

• Company setup and basics: Incorporating, meeting legal requirements, and setting up infrastructure.

• Market research and validation: Talking to customers, testing landing pages, and running surveys. Define the problem before you focus on solutions.

• Product development: Coding the MVP, testing hardware prototypes, or paying designers. Create a working version that users can test and investors can see.

• Early hires: A small team addition (an engineer, designer, or marketer) who can accelerate progress. Pre-seed funds often cover stipends or modest salaries for one or two necessary people.

• Customer acquisition experiments: Small campaigns, early content, or event participation to build a user waiting list or test initial demand. Even light evidence of engagement can give seed investors confidence.

• Runway and flexibility: Covering the founder’s living costs, hosting fees, or basic tools with room to change course if feedback suggests a new direction.

Smart founders treat every dollar as fuel for reaching visible, credible milestones. An MVP, a handful of engaged users, or a pilot customer can turn pre-seed money into the evidence needed to achieve the next stage.

What challenges do startups face in raising pre-seed funding?

Raising pre-seed funding takes resilience. The founders who succeed are generally those who keep refining their pitches, stacking small wins, and finding supportive investors early. Here are the obstacles that founders typically encounter:

• Proof of concept: With no product or revenue yet, convincing someone to invest can feel like an impossible feat. Investors want proof, but you need money to build this proof. The best solution is early validation, such as mock-ups, pilots, or even strong market research.

• Access and networks: Many founders don’t have wealthy friends or direct lines to angels. Making connections requires persistence. This might involve doing cold outreach, using accelerators, or leaning on other founders for introductions.

• Geography: Startup hubs such as San Francisco and New York are saturated with angels and pre-seed funds. Outside those regions, capital is thinner. Remote pitches are more common now, but local bias still matters.

• Competition: In many regions, more founders are chasing checks. Investors are more selective, which can mean more pitches and rejections before a round comes together.

• Rising expectations: The ideas and decks that satisfied pre-seed investors a decade ago often aren’t enough today. Many investors want a prototype, some traction, or user sign-ups before they write a check.

• Dilution and deal terms: Early money is expensive. It’s not unusual to give up 10%–20% of the company at the pre-seed stage. SAFEs and notes soften valuation debates, but founders still struggle with how much equity to part with.

How do investors evaluate startups at the pre-seed stage?

With little in the way of product or revenue to analyze, pre-seed investors focus more on signals of potential. Here’s what they consider:

• Team: Founders are the main focus. Investors look for domain expertise, technical ability, and evidence of grit. A well-balanced team (e.g., a business operator and a strong engineer) signals capacity to adapt and execute.

• Problem and market need: Is the problem real and is the solution compelling? Founders who can show they’ve done research through customer interviews, surveys, and waiting lists stand out.

• Early validation: Even modest signs matter. A working demo, a pilot customer, and sign-ups from a landing page can all reduce uncertainty.

• Product road map: Investors want to see a plan. They expect clarity on the MVP, a list of the next milestones, and an explanation for how capital leads to progress.

• Market potential and business model: There should be a credible vision of who will pay, how, and how large the opportunity could become. Venture-scale upside is key.

• Storytelling: The founder’s ability to communicate the vision clearly and persuasively is a differentiator. Investors ask themselves whether this founder can inspire customers, hires, and future backers.

• Fit and timing: Many investors specialize by sector. The right match, plus a sense that the market is ready now, can tip a decision toward yes.

Ultimately, pre-seed investing is driven by conviction. Investors back teams and ideas that feel early but inevitable, and they’re looking for founders who can make that transformation believable.

How Stripe Atlas can help

Stripe Atlas sets up your company’s legal foundations so you can fundraise, open a bank account, and accept payments within two business days from anywhere in the world.

Join 75K+ companies incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Applying to Atlas

Applying to form a company with Atlas takes less than 10 minutes. You’ll choose your company structure, instantly confirm whether your company name is available, and add up to four cofounders. You’ll also decide how to split equity, reserve a pool of equity for future investors and employees, appoint officers, and then e-sign all your documents. Any cofounders will receive emails inviting them to e-sign their documents, too.

Accepting payments and banking before your EIN arrives

After forming your company, Atlas files for your Employer Identification Number (EIN). Founders with a US Social Security number, address, and cell phone number are eligible for IRS expedited processing, while others will receive standard processing, which can take a little longer. Additionally, Atlas enables pre-EIN payments and banking, so you can start accepting payments and making transactions before your EIN arrives.

Cashless founder stock purchase

Founders can purchase initial shares using their intellectual property (e.g., copyrights or patents) instead of cash, with proof of purchase stored in your Atlas Dashboard. Your IP must be valued at $100 or less to use this feature; if you own IP above that value, consult a lawyer before proceeding.

Automatic 83(b) tax election filing

Founders can file an 83(b) tax election to reduce personal income taxes. Atlas will file it for you—whether you are a US or non-US founder—with USPS Certified Mail and tracking. You’ll receive a signed 83(b) election and proof of filing directly in your Stripe Dashboard.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company. Atlas C corp documents are built in collaboration with Cooley, one of the world’s leading venture capital law firms. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

A free year of Stripe Payments, plus $50K in partner credits and discounts

Atlas collaborates with top-tier partners to give founders exclusive discounts and credits. These include discounts on essential tools for engineering, tax, finance, compliance, and operations from industry leaders like AWS, Carta, and Perplexity. We also provide you with your required Delaware registered agent for free in your first year. Plus, as an Atlas user, you’ll access additional Stripe benefits, including up to a year of free payment processing for up to $100K in payment volume.

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