Pre-seed investors or investments are essentially incubators or accelerators. They are necessary for startup investment. The stage typically refers to that period when the company’s founders try to get their operation running. The cost of investments depends on the nature of the company and its initial costs to set up with the business idea. Thus, pre seed investing is relevant for the companies in the early stages to grow significantly.
Reasons You Need Pre-Seed Investment
Now, as you know what pre-seed investors are, let us examine some of the myths of pre-seed investors.
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Pre-seed investors invest in ideas:
Pre-seed investors will invest if they hear a great pitch from a founder. If you do your homework and practice your pitch, you are good to go. Investors will judge depending on your presentation.
The pre-seed investors of institutions take this stage for investments very seriously. They can recognize the risks at the first stage and evaluate the authenticity of the startup founders, market opportunity, and the benefit they get from it. All these depend on how your business model is, your unique product, distribution, and development.
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Startups cannot raise a proper funding round:
People often assume that the startups who look for pre-seed investors are not good enough to raise their early-stage funding. They reduce their faith and water down the fundraising pitches. It is a misconception. It only discourages the investors from taking the promising pre-seed opportunities. The company may feel that they are not strong enough to go for a bigger round to raise their pre-seed funding.
That is wrong. It may be that the founders are not yet ready. If you raise a pre-seed fund, this will help your startup build and distribute your product. It can be done within less time and with less amount of capital.
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Investments in the pre-seed funding can create more options:
There are other investors called casual investors. These investors do not know what they are doing. At worst, they do not care about their investments. But they do not have much to lose if they spend their money elsewhere.
Let us assume that there are no single investors that want their startups to invest by these investors. Not do they want to choose an investor that does not make them a priority. Good pre-seed investors are the active ones and not the passive investors. They live and die for their success of portfolios. There are several committed pre-seed investors that in what have become a burgeoning segment in the US.
A modern necessity
After reading the myths, if you want to be a successful entrepreneur, then the pre-seed investment is the first step to get your venture on the ground.
You can say it is a necessity for early-stage startups. But why? Let us look at the points below.
- Your product becomes recognized.
- Market feedback
- Dream team
- A more excellent distribution with key distributing channels.
Thus, there is no doubt that the pre-seed investors are essential not only for your startup at an early stage but also for the future development of your company.
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