Pre-seed funding in India

What pre-seed funding is

Pre-seed comes before seed. It is the first cheque from outside the founding team.

You may have an idea, a team and a prototype. Revenue may not exist yet.

The money buys time to learn. Build the first version. Put it in front of users. Find out if the problem is real.

Raise only what that work needs. Money for shares costs you a share of the company.

Pre-seed money can come from angels, accelerators, grants or your own savings.

Are you at pre-seed?

• You have a team and a problem worth solving.
• You have a prototype, a pilot or a waitlist.
• You have not raised a priced round yet.
• You need money to build, not to scale.
• Your next goal is proof that users want it.

Do people already pay you each month? Read the seed page next.

How a pre-seed round is written

• A SAFE: money now, shares at your next priced round.
• A convertible note: a loan that turns into shares later.
• A priced round: shares sold at a set price per share.
• In India, a priced round may use CCPS. These are preference shares that must convert to equity.
• A grant or prize: check each scheme's terms before you apply.

How to raise a pre-seed round

1. 1Write down what the money will build.
2. 2Set a raise that covers that work, with a buffer.
3. 3Check your runway with and without the raise.
4. 4Pick a SAFE, a note or priced shares.
5. 5Work out the dilution before you send anything.
6. 6Make a short deck with the slides below.
7. 7List investors who back pre-seed in your sector.
8. 8Write to each one from your own mailbox.
9. 9Track every reply. Follow up once, then move on.

Questions to answer before you pitch

• Who has this problem, and how often?
• How do they solve it today?
• Why is your team the one to fix it?
• What will this money prove, and by when?
• How much of the company will you sell?
• What happens if the round takes longer?
• What would make you stop and change course?

Papers to have ready

• A private limited company, so you can issue shares.
• A founders' agreement on roles, shares and vesting.
• Your cap table, even if it has two names.
• Proof of what you built: a demo or a pilot.
• A one page plan for the money.
• DPIIT recognition, if you want government schemes.

Mistakes to avoid at pre-seed

• Raising before you can say what it will build.
• Giving away a large stake for a small cheque.
• Skipping vesting between co-founders.
• Taking money on terms you have not modelled.
• Writing to investors who do not back your stage.
• Spending months on a deck before talking to users.

Before you raise seed

• Show what you built with the pre-seed money.
• Show who uses it, and how often.
• Keep a clean cap table from day one.
• Keep every SAFE and note in one place.
• Send investors a short update each month.
• Know which numbers you will show at seed.
• Keep your burn low until users pull for more.

Questions founders ask