By: Kholoud Hussein
Timing, amount of money raised, valuation, and product or development stage are the four defining factors that determine the stage of funding you are in.
During pre-seed rounds, your company won’t have a trail of financial records to showcase company success. Instead, you’ll need to show investors that you have planned out your company’s journey toward success with detailed steps and an MPV.
Companies are ready for seed funding after gaining traction and proving market needs. Additionally, you have a well-developed business strategy and a fully developed product with early customer adoption. Founders use funding through seed rounds to scale businesses and begin production.
Pre-Seed Funding
The earliest stage of funding a new company comes so early in the process that it is not generally included in the funding rounds. Known as "pre-seed" funding, this stage typically refers to when a company's founders get their operations off the ground. The most common "pre-seed" funders are the founders, close friends, supporters, and family.
Depending upon the nature of the company and the initial costs of developing the business idea, this funding stage can happen very quickly or take a long time. It's also likely that investors at this stage are not investing in exchange for equity in the company.
Seed Funding
Seed funding is the first official equity funding stage. It typically represents the first official money a business venture or enterprise raises. Some companies never extend beyond seed funding into Series A rounds or beyond.
Seed funding helps a company finance its first steps, including market research and product development. With seed funding, a company has assistance in determining what its final products will be and who its target demographic is. Seed funding is generally used to employ a founding team to complete these tasks.