Pre-seed phase of a startup: what is it and what does it consist of?

The development of a startup goes through several fundamental stages, being the pre-seed phase one of the most important and challenging. This moment marks the beginning of the path where ideas start to become a structured and viable project.

What is the pre-seed phase?

The pre-seed phase, also called the pre-seed phase, represents the starting point in the life cycle of a startup. During this initial period, founders work on shaping their business idea, validating their proposal and laying the groundwork for future growth.

At this stage, entrepreneurs usually finance themselves with their own resources, support from family or friends, and even the help of angel investors. This initial capital is mainly used to conduct market research, build a prototype or Minimum Viable Product (MVP), and test the demand for the product or service in the market.

Key activities in this phase include:

• Define the business idea, clearly describing the product or service, the problem it addresses and the target audience.
• Research the market, identifying opportunities and analyzing competitors.
• Validate the viability of the business model, ensuring that it is sustainable and responds to a real need.
• Develop a prototype (MVP) to obtain valuable feedback from early adopters.
• Form an initial team, recruiting key profiles with complementary skills.
• Create a brand identity, defining its image and starting to position it.
• Seek financing, preparing the basis for future investment rounds through a solid strategic plan.

These steps make the pre-seed phase decisive in determining whether or not a startup can succeed.

Characteristics of the pre-seed phase of a startup

As the initial point in the development of a startup, the pre-seed phase is distinguished by certain particularities:

1. High uncertainty: The success of the idea is not yet clear, and both the market and competitors may be unknown.
2. Scarcity of resources: With tight budgets, entrepreneurs rely on their own savings or close networks for financing.
3. High risk: Lack of validation, limited resources and market uncertainty increase the likelihood of failure.
4. Flexibility: It is crucial to adapt to changes in the market or adjust the initial idea according to the needs detected.
5. Validation of the idea: Tangible evidence of the viability of the business model is sought through testing with potential customers.
6. Creation of the MVP:Allows to obtain real data and adjust the proposal before making important investments.
7. Focus on scalability: From the outset, a model is designed that can grow rapidly to capture a significant share of the market.
8. Constant iteration: Entrepreneurs continually refine their proposition based on feedback from the market.

Objectives of a startup in the pre-seed phase

The main goals at this stage focus on building a solid foundation for long-term success. Although each startup has its own challenges, some common goals include:

• Define and validate the business idea, getting early feedback and making sure there is market demand.
• Develop a prototype or MVP,testing it with real users to minimize risks before significant investments.
• Build a strong founding team of people, with complementary skills and a common vision.
• Establish a clear strategy, defining achievable and flexible objectives to guide initial growth.
• Secure initial financing, exploring various options and efficiently managing the resources obtained.

Pre-seed financing options for startups

At this initial stage, the sources of financing are more limited than in later stages, but there are several alternatives:

1. Self-financing: Founders use own savings or personal resources, adopting approaches such as bootstrapping to minimize costs.
2. “The 3F” (Friends, Family & Fools): Investments from family, friends or close contacts who trust the idea.
3. Grants and competitions: Support from government or private programs focused on entrepreneurship.
4. Incubators and accelerators: Offer mentoring, training and networking, often in exchange for a small stake in the company.
5. Crowdfunding: Platforms that allow raising funds from many people, offering rewards or shares in the company.
6. Loans and lines of credit: Although these are more common later-stage options, they may be considered in specific cases with collateral or initial income.

Each option has advantages and disadvantages, and the choice will depend on factors such as the amount of capital required, the time available and the degree of control the entrepreneurs are willing to give up.

This publication does not constitute legal advice.

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