Pre-Seed Fundraising Stage and Where To Begin

Are you in the pre-seed fundraising stage and don't know where to begin? You’ve got an elevator pitch and a dream. Now where should you focus your energy? Sure, the pre-seed stage of a SaaS startup is an exciting landscape of potential and opportunity, but that also means taking on the scary unknown. Turning an idea into a tangible product or service is no easy feat! The good news is that it’s been done before, and you don’t have to reinvent the wheel. Point your energy in the right direction to build a strong foundation in the pre-seed. Here’s how:

Validate The Vision

‍You know the drill (well, maybe you don’t, and that’s okay): build the right thing, THEN build the thing right. Is there a real market for your product or service? You may think so, but you’ve gotta have some data to back that hunch if you want somebody to fund that bad boy.

Idea validation

Define your target audience: Spell out exactly who you are trying to solve a problem for. Understand their demographics, interests, and behaviors.
Identify their pain points: Conduct surveys, interviews, or focus groups to get down to the nitty-gritty of their specific challenges.
Research existing solutions: Analyze competitors' products, services, and pricing strategies. What works? What do you have that they won’t?

Build That MVP

Think simple. How can you most simply showcase the most essential features that address the most critical needs of your target market? This will let you test your product and get some feedback.

Prototype Development

Define core functionalities: Pick the ones that provide the most value to your users.
Build a functional prototype: Find some talent you trust to build that sucker, something that works.
Gather user feedback: Conduct usability testing or user interviews to gather some feedback on functionality, user interface, and overall experience.

Secure Your Bag

I know, I know - it’s easy to list this as a checkbox to simply cross off your list, but much harder to execute. Securing funding is arguably the most daunting task of any startup, but by no means impossible. You’ve got a couple options:

Angel investors: People with the dough who invest in early-stage startups in exchange for equity.
Venture capitalists: Pro investors who manage funds to invest in high-growth startups with the potential for serious returns.
Crowdfunding platforms: Think Kickstarter and Indiegogo; raise funds from a large pool of individual investors.

Securing Funding

Develop a sweet pitch: I know you’ve seen Shark Tank. Show off your product's unique value proposition, target market, competitive advantage, and financial projections.
Identify potential investors: Research angel investors and venture capital firms that focus on your industry and stage of development.
Network and build relationships: Attend industry events, conferences, and meetups. Who you know can go a long way.
Be prepared for due diligence: Investors will conduct due diligence on your company, including reviewing your financial statements, business plan, and team composition - so document that ish well.

Hire The Pros

‍This is the fun part, don’t you think? The people pushing your product forward can make or break the experience for you. Fill your crew with people who Patrick Lencioni would consider “Ideal Team Players”: those who are humble, hungry, and smart. And of course, hire your weaknesses.

Assembling a Team

Start small, and grow when the feedback from your team demands it. Don’t over-hire in the beginning just to start your product off with layoffs. We recommend a flexible staff arrangement in the beginning with a longterm goal of 1/3 to 2/3 flexible staff to W2 employed team longterm.
Utilize a partner that has experience in building startup products to provide you with a flexible team to have flexible skillset diversity, and cost to fast track your success and extend your runway.
If the environment isn’t supportive and collaborative, it’s not gonna work. Foster transparency and continuous reminders of the vision. Look into the Working Genius model and ensure that people’s strengths are being used to their full potential.

Get ‘Em to Buy What You’re Selling

‍It’s never too early to start selling to your buyers. Attracting early adopters will help you validate your product and generate revenue.

Customer Acquisition

If Gen Z is who you’re after, you’ll have to get really comfy in the TikTok sphere. If a C-Suite level exec is your target, maybe the LinkedIn game will be your best bet. Know where to reach your audience.
Blogs, infographics, testimonials, case studies - make ‘em informational, but keep the charm alive while you’re at it.
Build an email list and send targeted campaigns to nurture leads, promote special offers, and encourage product trials. Keep in mind that the market can get really saturated here, so put your relationship-building above all else. Be a real human being, not a pushy salesman. People buy from who they trust.
Make sure your name pops up when your audience googles the problem that you can solve. Do the work to increase organic traffic and passive leads now, thank yourself later.

Watch What Works

‍Don’t just guess if your efforts are working. Track their success, make pivots, and save yourself precious funding early.

Metrics for Pre-Seed SaaS Startups

Track the number of new users acquired each month to measure the effectiveness of your marketing efforts and product appeal.
Monitor the percentage of users who continue using your product over time to assess its long-term value and identify any churn issues.
Calculate the average revenue generated from each customer over their lifetime to evaluate the profitability of your product and customer acquisition costs.
Track monthly recurring revenue (MRR) and annual recurring revenue (ARR) to measure the financial growth of your business and identify areas for revenue optimization.

Adapt, Iterate, Repeat

‍You’re not going to do it perfectly on the first try. During pre-seed fundraising especially, we have to be willing to look at this baby objectively and pivot early and often. Listen to your users, watch your market, leave your ego with coat-check, and embrace flexibility.

Adapting and Iterating

Gather User Feedback: I said it before and I’ll say it again. Ask your audience, and then prioritize product updates in response.
Monitor Market Trends: Things change quickly ‘round here. Watch trends and new products to find opportunities to innovate and adapt.

A roadmap for navigating the pre-seed stage of your SaaS startup journey. It’s a challenge, but it’s not impossible.

Looking for more personalized guidance for your pre-seed fundraising? Schedule time with Midwestern Founder & CEO, Matthew Johnson, who's clients raised over $200M.