“Five Benefits of - Seed Capital Vs. Pre-seed Capital That May Change Your Perspective”
What is pre-seed capital?
Pre-seed capital is the initial stage of fundraising for a startup needed to kick start a business. It is the early stage of funding, where investors provide capital to startups for developing its product or services.
What is seed capital?
Seed capital is the next stage in fundraising for startups where an idea forms the shape of a business. It helps till the point when startups begin selling goods or services.
Pre-seed capital vs. seed capital
The difference between pre-seed and seed capital is that the amount raised through pre-seed funding is relatively lower than seed funding with a targeted runway of 3-9 months in pre-seed funding and 12-18 months in seed funding.
Benefits of pre-seed capital vs. seed capital
Pre-Seed Capital bridges the gap between the initial stage of the startup and the seed funding stage.
Seed funding helps entrepreneurs to take off business from the ground and increases business resources.
Pre-seed funding stage demands a lower amount of funds than other states.
Seed funding is a debt-free financing option with no outside burden of liabilities or loans.
Pre-seed funding is less risky than bootstrapping i.e., the self-starting process without external inputs.
Seed capital accelerates startup growth with the knowledge and expertise of investors needed to burn money to sustain their development prior to the stage of profitability.
In Pre-seed funding, limited capital ensures efficiency, effectiveness, and growth by enhancing business operations and running.
There are no monthly fees, interest, or charges in Seed funding as the investors are the stakeholders. It can be raised through crowdfunding, incubator, accelerator, angel investor, debt funding, venture capital, etc.
For example– seed capital and pre-seed capital can both be raised through First Funding, where there are numerous benefits for both startups and investors.
Pre-seed capital helps in bringing key stakeholders, CFO, registering business, patents, trademarks, blueprints of organization, etc., with a hope of future expansion.
With Seed funding, the business network and relations expand with a rapid increase in the customer base of the business and competitive advantage.