What is the pre-seed series?
The need for pre-seed financing corresponds to priming. This is the beginning of the project, the pre-seed stage preceding the seed stage. At this stage, the company needs funds to get off the ground.
Without being a real financing round, the pre-seed corresponds to the first search for financing. It is generally used to finance the setting up of the project and the development of the product or service, as well as the commercial offer.
It will also be used to create the company and launch the business model. At this stage, the business model has not yet been finalized: the project is still in its infancy, pivoting and evolving according to technical constraints and market requirements.
This stage includes expenses related to market research, prototype manufacturing, payment of legal and technical fees, patent registration, financing of first production runs, etc.
Who are the pre-seed investors?
The main investors are the founders, friends and family (love money) or the State or local authorities through grants and subsidies. Some projects take out bank loans during the pre-seed phase, but this often represents a greater risk for the manager (personal guarantee, blocking of current account, etc.).
This first round of financing enabled the company to start up its business and have cash available.
What is Seed?
Once the company has been created, it carries out its own activity and lives its own business model. As the business develops, new material, financial and human needs arise, which amplify the financial requirements. This is the seed stage.
The importance of raising capital is explained by the increase in financial requirements resulting from the need to invest, recruit and communicate, as well as by the development of WCR.
When the business is there, not giving a company the means to grow can be detrimental. This leaves the way open for competitors to take a place that the company may never be able to regain.
Who are Seed investors?
The seed series is often the first real round of financing. Several types of investors may be involved:
- Business Angels, seed funds and private investors;
- banks through loans;
- BPI France for a guarantee or back-up investment.
Amounts raised range from 250 K to 700 K. At this stage, if the project has good potential, a bank loan enables management to limit dilution. A capital contribution can also provide interesting financial leverage.
