By: BRADFORD HALL
5 Steps to Successful Pre-Seed Funding
Pre-seed funding is becoming increasingly popular for entrepreneurs as investors’ expectations for emerging companies continue to rise. While all means of raising capital for your business ventures can be viable, this particular one requires a specific type of preparation to set yourself and your business up for success. Adhering to the following standards can make your startup more attractive to pre-seed investors.
1. Have a quantifiable path to profitability
The pre-seed round is set apart for many reasons, one of the most prominent being that most pre-seed stage companies are not yet profitable. This can make some investors, those who don’t specialize in one specific round, nervous. Put investors at ease by clearly outlining your business’ path to profitability.
A thoughtful plan that serves as a long-term roadmap can be more important than a shortcut. Keep your estimates attainable and concise. Don’t force investors to go hunting for the profitability statements, either. Emphasize strategy and transparency in this tactic. To win investors you need to build trust and credibility. Including this information in an executive summary and expanding upon it in financial statements is essential to achieving both trust and credibility.
2. Show proof of concept
Similar to path to profitability, proof of concept is key in winning over investors. Whatever your business has done to test your ideas, assumptions or products needs to be communicated clearly and transparently to your potential investors. Consider bringing in actual test models or results and sharing your expanded takeaways.
If your original tests led you to make changes, communicate these updates with investors. Demonstrating that your business can pivot toward a more successful offering will show investors your ingenuity and flexibility within the grand scheme of your business plan.
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