Investors typically invest at particular stages of a startup, from “Pre-Seed” to “Series A” and beyond. The chart in this video explains how each stage works and typically where your startup may fall in that journey.
The most common questions to ask are:
- “Have you ever raised money before?” - If this is your first fundraise, then you are likely considered “Pre Seed” because you simply have not raised before. However, if you’re raising more than $1 million you’ll typically start talking to Seed Stage investors (not Pre-Seed) as they tend to write larger checks.
- “Are you raising more than $5 million?” - Although it’s possible to raise $5 million as your first round of professional capital, it’s very unusual. By the time startups are raising $5m+ they usually have taken on smaller amounts from professional investors. A more typical “first time raise” would cap out around $3m if there was no previous funding, but that’s just a general rule of thumb.
- “Do you know what investors to look for?” - All investors are not created equal. If we’re raising a “Pre-Seed Round” we’re likely talking to Accelerators, Incubators or Friends/Family. But if we’re raising $5m+ we’re likely going to be talking to Venture Capital firms. Although there is some overlap (Angel Investors invest in Pre-Seed and Seed) most investors specialize in a single stage.
It's OK to be a little unsure about which Stage makes sense – this is just a general guide to help triangulate the right investors.