1. Time Frame
The timeframe between pre-seed and seed investment rounds usually ranges from 3 to 9 months,.
2. Cash
The pre-seed funding usually ranges from $100K to $600K, which can be split and released upon the completion of specific milestones.
3. Vehicle & Valuation
The aim is to utilize a SAFE or Convertible structure for funding. It is too early for a priced round, as valuations at this stage tend to be stretched and subjective.
What You Plan, Promise, And Need To Execute
1. Flagship Solution
Given the limited time and resources at this stage, it is wise to concentrate all efforts on the solution that has the potential to achieve the primary objective – market validation.
2. Market Size
The total available market is important as it indicates the general potential. However, founders are typically the ones to generate the first revenue or traction. Therefore, it is crucial to also consider the market that you can personally access within the next 9 to 12 months.
3. Traction
Ideally, investors want to see the “hockey stick” growth curve. Easier sad than done, but the closer you are, the higher valuation you’ll get at the next funding round.
3. Pricing Strategy
The pricing model reflects the target market and how you plan to sell your solution. It is essential for the pricing to be clear, realistic, and defensible.
Where You Need To Finish To Close A Seed Round
1. Traction & Monetization
•Monthly revenue – $20K to $150K
•The less revenue the more other proof of traction is needed
•Recurring revenue is much more valuable
2. Growth
Growth of 15% – 30% MoM
Any other relevant metric that proves traction
3. Traction
Ideally, investors want to see the “hockey stick” growth curve. Easier sad than done, but the closer you are, the higher valuation you’ll get at the next funding round.
3. Valuation
Valuation depends on your performance described above and during the next stages of funding, it is typically based on a revenue multiple:
•1x – 5x for startups that are growing very slowly (~10% per year),
•6x – 10x for startups that are growing in the lower two digits (30-40% per year),
•10x – 20x for tech startups that are growing in the three digits (300-400% per year)
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