To set the scene: Pre-Seed is a relatively new term and for those that it is relevant for, your challenges are going to centre around the market opportunity, the problem you solve, why now is the time to invest and how this is going to make money. Your narrative, your why and your purpose have to be nailed at this stage, even if the product is not quite there yet. The following 4 challenges are not an exhaustive list but they come up a lot so it is worth going through them and linking them to your own venture
Challenge 1 – I don’t have an MVP.
It used to be that a well thought out deck was enough to secure some funds. This is no longer the case and to keep up to speed with other startups vying for the same VC wallet, you need an MVP. It needs to have either entered the market or at least Alpha or Beta stage of development. I don’t mean it has to be pulling in MRR yet, but naming a few customers for example.
Challenge 2 – I don’t know what goes in my deck.
There are some very interesting stats around this. On average, an investor takes 3.5 minutes on a deck, so your solution needs to be outlined in this time. The other areas you should focus on are why investing now is the right time and what is your plan to monetise this solution or product. If you can also outline what is the market opportunity, clearly defining the problem you solve, why now is a good time to invest and your route to revenue, you’ll have a good deck.
Challenge 3 – I’m not sure how many investors I need to meet with.
For a Pre-Seed round, in the US on average it is $500k and Globally, the average is $415k. For this, your pipeline should be around 50 investors as a shortlist, looking to try and hold 26 investor meetings (50% conversion), gaining commitment of a $50k ticket from 8 of these (33% conversion) to get you that $400k. And remember, if the deck is about 20 pages (no longer) and can be communicated in under 3.5 minutes and be accessible on mobile, then you are on the right lines.
Challenge 4 – do I give away some of my company?
At Pre-Seed stage, then there are going to be potential financing solutions available to you that are non-equity, things like grants and startup loans as opposed to carving up your company too early. Keeping as much of the equity amongst the founding partners or first few employees, so much the better.