{"concept_id":"ALTSS-VC-002","slug":"pre-seed","canonical_name":"Pre-Seed","aliases":["pre-seed round","pre seed funding"],"kind":"term","authority":"industry","facets":["STG"],"domains":["VENTURE"],"display_title":"Pre-Seed","search_aliases":["what is pre-seed funding","pre-seed vs seed","pre-seed round meaning","who invests in pre-seed"],"one_sentence_definition":"Pre-seed is the earliest stage of startup financing, used to turn an idea or prototype into a first product and initial evidence of demand, typically funded by founders, angels, accelerators and specialist pre-seed funds.","plain_english":"At pre-seed a company is often just its founders and a prototype or a hypothesis. The money pays for building a first version and testing whether anyone wants it. With little or no revenue, investors judge the team, the problem and the speed of learning more than any financial metric.","parent_concepts":["venture-capital"],"child_concepts":[],"related_concepts":["seed-round","safe-simple-agreement-for-future-equity","angel-investor","startup-accelerator","convertible-note","startup","dilution","emerging-manager"],"comparison_concepts":[],"not_the_same_as":[{"slug":"seed-round","distinction":"Seed usually follows pre-seed and is often the first round led by an institutional investor; it funds the search for product-market fit rather than the first build."},{"slug":"startup-accelerator","distinction":"An accelerator is a programme that often invests at pre-seed; pre-seed is the stage, not the investor type."}],"formula_ids":[],"worked_examples":[],"sections":[{"heading":"What a pre-seed company is trying to prove","paragraphs":["Pre-seed capital buys evidence. The usual questions are whether the team can build the product, whether the problem is real and painful, and whether a defined group of users will engage. Evidence at this stage is mostly qualitative or small-sample: a working prototype, design partners, pilots, a waitlist, early usage or letters of intent. A pre-seed round succeeds if it produces enough of that evidence to raise a [seed round](/glossary/seed-round) on reasonable terms."]},{"heading":"Who invests","paragraphs":["Founders and their personal networks often put in the first money. Outside capital comes from [angel investors](/glossary/angel-investor), [angel syndicates](/glossary/angel-syndicate), [accelerators](/glossary/startup-accelerator) that invest standard amounts for standard terms, and small funds that specialise in the stage. Some larger venture firms invest at pre-seed through scout programmes or small dedicated pools. Lead investors exist but are less common than in later rounds; many pre-seed rounds are assembled from several small cheques on identical terms."]},{"heading":"Instruments","paragraphs":["In the US, pre-seed rounds are commonly raised on [SAFEs](/glossary/safe-simple-agreement-for-future-equity) or [convertible notes](/glossary/convertible-note). Both defer the price per share to a later [priced round](/glossary/priced-round), but a valuation cap, where there is one, still caps the investor's effective entry price and, for a post-money SAFE, sets a minimum ownership percentage. Priced pre-seed rounds happen but are less common because legal costs are high relative to the amount raised. Outside the US, local instruments and tax-relief schemes shape the choice, so the US pattern should not be assumed.","In the UK, income tax relief under the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) is available only for ordinary shares that, at no time during the relevant period, carry any present or future preferential right to the company's assets on a winding up, any present or future right to be redeemed, or a preferential dividend right of the kind the statute describes (Income Tax Act 2007, section 173 for EIS and section 257CA for SEIS, as in force on 2 October 2026). Shares whose liquidation preference gives them a preferential right to the company's assets on a winding up therefore do not qualify. Unless they are bonus shares, the shares must also be subscribed wholly in cash and fully paid up when issued (section 173(3) for EIS, section 257CA(4) for SEIS)."]},{"heading":"Why there is no standard size","paragraphs":["Neither \"pre-seed\" nor \"seed\" is a legal or regulatory category. They are labels founders and investors choose, and their meaning moves with the funding market: rounds that would have been called seed in one year are called pre-seed a few years later, and norms differ between the US, Europe and Asia. This page does not give typical round sizes for that reason. Any size or valuation statistic should state its source, geography and date."]},{"heading":"How LPs read pre-seed exposure","paragraphs":["Pre-seed funds hold many small positions, expect a high share of losses, and wait longest for liquidity. Their stakes are diluted by every later round, so the manager's [follow-on reserves](/glossary/follow-on-reserves) and ability to keep [pro rata rights](/glossary/pro-rata-rights) matter as much as entry price. Many pre-seed managers are [emerging managers](/glossary/emerging-manager) running small funds, so LP diligence focuses on sourcing, decision process, and how the manager's companies progress to later priced rounds."]}],"classification_rules":[],"calculation_rules":[],"common_mistakes":["Treating pre-seed as a defined regulatory or legal category.","Assuming a SAFE or note avoids dilution. The dilution is deferred, not avoided: it is realised when the instrument converts and, for a capped instrument, largely set by the cap agreed at signing.","Comparing round sizes from different years or regions without dating and sourcing them.","Judging a pre-seed manager on early marks, which reflect a few later rounds rather than realised outcomes."],"edge_cases":[],"external_standard_mappings":[],"source_ids":["SRC-UK-LEG-ITA2007-S173","SRC-UK-LEG-ITA2007-S257CA","SRC-YC-SAFE"],"citations":[{"source_id":"SRC-YC-SAFE","pinpoint":"Post-money SAFE forms and User Guide","supports":"SAFE as a right to future shares converting at a priced round; post-money ownership calculable at signing","source":{"source_id":"SRC-YC-SAFE","title":"Y Combinator SAFE (post-money) documents and SAFE User Guide","authors":"Y Combinator","publisher":"Y Combinator","document_type":"template","url":"https://www.ycombinator.com/documents","year":2018,"publication_date":"Post-money SAFE introduced 2018","jurisdiction":"US","status":"Current","last_verified":"2026-10-01"}},{"source_id":"SRC-UK-LEG-ITA2007-S173","pinpoint":"Sec. 173(1)-(3) (latest available revised text, no outstanding effects at 2 October 2026)","supports":"EIS shares requirement: ordinary shares with no preferential dividend (as defined in (2A)), winding-up or redemption rights during period B; unless bonus shares, subscribed wholly in cash and fully paid up","source":{"source_id":"SRC-UK-LEG-ITA2007-S173","title":"Income Tax Act 2007, s.173 - The shares requirement (Enterprise Investment Scheme, Part 5)","publisher":"UK Parliament (legislation.gov.uk)","document_type":"statute","url":"https://www.legislation.gov.uk/ukpga/2007/3/section/173","publication_date":"Revised text (accessed 2026-10-01)","jurisdiction":"UK","status":"in force","last_verified":"2026-10-01"}},{"source_id":"SRC-UK-LEG-ITA2007-S257CA","pinpoint":"Sec. 257CA(1)-(4) (latest available revised text, no outstanding effects at 2 October 2026)","supports":"SEIS shares requirement: same share-rights conditions during period B; unless bonus shares, subscribed wholly in cash and fully paid up","source":{"source_id":"SRC-UK-LEG-ITA2007-S257CA","title":"Income Tax Act 2007, s.257CA - The shares requirement (Seed Enterprise Investment Scheme, Part 5A)","publisher":"UK Parliament (legislation.gov.uk)","document_type":"statute","url":"https://www.legislation.gov.uk/ukpga/2007/3/section/257CA","publication_date":"Revised text (accessed 2026-10-01)","jurisdiction":"UK","status":"in force","last_verified":"2026-10-01"}}],"faq":[{"q":"What is the difference between pre-seed and seed?","a":"Pre-seed funds the first product and early demand evidence, usually from founders, angels and accelerators. Seed funds the search for product-market fit and is more often led by an institutional seed fund. The boundary is a market convention and has moved over time."},{"q":"Is a pre-seed round priced?","a":"Often not in the US: pre-seed rounds commonly use SAFEs or convertible notes that convert in a later priced round. Priced pre-seed rounds exist but are less common."}],"seo":{},"first_published":"2026-01-04","last_reviewed":"2026-10-02","last_modified":"2026-10-02","content_version":"2.0.0","url":"https://altss.com/glossary/pre-seed","json_url":"https://altss.com/reference/concepts/pre-seed.json","title":"Pre-Seed","formulas":[],"sources":[{"source_id":"SRC-UK-LEG-ITA2007-S173","title":"Income Tax Act 2007, s.173 - The shares requirement (Enterprise Investment Scheme, Part 5)","publisher":"UK Parliament (legislation.gov.uk)","document_type":"statute","url":"https://www.legislation.gov.uk/ukpga/2007/3/section/173","publication_date":"Revised text (accessed 2026-10-01)","jurisdiction":"UK","status":"in force","last_verified":"2026-10-01"},{"source_id":"SRC-UK-LEG-ITA2007-S257CA","title":"Income Tax Act 2007, s.257CA - The shares requirement (Seed Enterprise Investment Scheme, Part 5A)","publisher":"UK Parliament (legislation.gov.uk)","document_type":"statute","url":"https://www.legislation.gov.uk/ukpga/2007/3/section/257CA","publication_date":"Revised text (accessed 2026-10-01)","jurisdiction":"UK","status":"in force","last_verified":"2026-10-01"},{"source_id":"SRC-YC-SAFE","title":"Y Combinator SAFE (post-money) documents and SAFE User Guide","authors":"Y Combinator","publisher":"Y Combinator","document_type":"template","url":"https://www.ycombinator.com/documents","year":2018,"publication_date":"Post-money SAFE introduced 2018","jurisdiction":"US","status":"Current","last_verified":"2026-10-01"}]}