Who Is Investing @ Pre-Seed?

Originally posted on May 24th, 2024

Substack: https://jamesin.substack.com/p/who-is-investing-pre-seed

Introduction

I’ve been thinking a lot about pre-seed funding rounds.

It’s tough out there.

The standards for deals closing are extremely high right now.

Pre-seed has always taken on a lot of risks — execution, demand, customer acquisition, market timing — and those concerns are even more acute in the slower fundraising environment.

Because of this, I’ve noticed a shift in funding strategy in some funds. The funds that used to invest in both pre-seed and seed-stage rounds are now leaning more heavily toward seed rounds.

So, what’s the situation with pre-seed funding?

Accelerators continue to dominate this space. Y Combinator is still the star and goliath, generally investing $125K for 7%, and then another $375K for the first $375K in the next round of financing. However, we’re seeing new players like HF0, NEO, and Sequoia Arc launch incredible programs.

But what about founders who aren’t sure about the accelerator trade-offs? The ones that have put together a strong team, developed an early MPV, and are looking for initial capital to scale and land the first few customers. Where should they focus their fundraising energy?

The purpose of this post is to highlight some pre-seed-specific funds. Over the past few weeks, I’ve spoken to several founders who have shared their grievances about the pre-seed raising environment. Internally, we have information, dashboards, and stats for all funding rounds using Crunchbase data — so I figured it might be helpful to share some of this data.

The report includes a link to the most active in the pre-seed stage over the past two years and some statistics about those funds.

PreSeed Funding Volume

The next section contains the spreadsheet with useful data.

But before we get into it, let’s zoom out really quickly and show a graph of pre-seed funding over the past few years.

The main thing to keep in mind is that most pre-seed funding rounds are unannounced. We’re looking for directional trends rather than precision.

Spreadsheet with Pre-Seed Data

***PreSeed Funding Rounds Investor Stats***

https://docs.google.com/spreadsheets/d/12ReJ0W_UdL-hmEmv5fPOrlEnpqnb4DokvcQSCZyY0e0/edit#gid=127325465

Things to keep in mind

• There are many unannounced pre-seed rounds. Consider all the data to be directionally correct but an estimate.
• The “% of PreSeed rounds” metric specifically focuses on initial investments and excludes any follow-on funding rounds. For instance, if FundX participated in only two funding rounds last year — one pre-seed and one seed, both for CompanyZ — the percentage of pre-seed rounds for FundX would be counted as 100%.
• To be included, funds have to have invested in at least 10 pre-seed rounds in the past 2 years.
• The data is collected from Crunchbase.
• The spreadsheet includes links to the company’s website and LinkedIn in case someone wants to look up investors, country, year founded, number of exits, number of pre-seed rounds invested in for the past 2 years, and also the percentage of rounds that were pre-seed.

Highest Volume Pre-Seed Venture Funds

So, what are the best non-accelerator options? Below are the funds with the highest pre-seed volume in the past two years.

1. Liquid 2 Ventures (http://liquid2.vc): Founded in 2015 and based in the US. To date, it has made 902 investments, achieving 67 exits. In the past two years, the firm has made 55 announced investments in pre-seed, representing 39.01% of its total investments.
2. Sunstone Management (http://sunstoneinvestment.com): Founded in 2015 and based in the US. To date, it has made 106 investments, achieving 2 exits. In the past two years, 60% were pre-seed, totaling 36 rounds.
3. Everywhere Ventures (The Fund) (https://everywhere.vc/): Founded in 2018 and based in the US. To date, it has made 336 investments, achieving 10 exits. In the past two years, the fund has 35 announced pre-seed investments, accounting for 53% of their activity.
4. Pareto Holdings (https://www.pareto20.com/): Founded in 2020 and based in the US. To date, it has made 442 investments, achieving 40 exits. In the past two years, the fund made 28 pre-seed investments, which represent 37% of its total investments.
5. Hustle Fund (http://hustlefund.vc): Founded in 2017 and based in the US. To date, it has made 237 investments, achieving 14 exits. In the past two years, 46% of their investments were in pre-seed rounds, totaling 27 investments.
6. Right Side Capital Management (http://rightsidecapital.com): Founded in 2010 and based in the US. To date, it has made 1,372 investments, achieving 201 exits. In the past two years, they have made 27 pre-seed investments recently, which represent 53% of their activity.

Highest Volume Accelerators

As I touched on earlier, accelerators have taken off over the last decade. On the founder side, the appeal of programs like YC is simple: you get access to their extensive network, the camaraderie of building alongside other founders, and a clear timeline that culminates in a demo day to help generate buzz and momentum for your funding round.

For funds, being an accelerator allows you to secure a larger stake in a company early on and show a quick markup if the company is successful in raising money.

1. Y Combinator (https://www.ycombinator.com/): Founded in 2005 and based in the US. To date, it has made 6,308 investments, achieving 564 exits. In the past two years, the accelerator has made 936 announced investments, with 555 of these being pre-seed, representing 59.29% of the total.
2. Techstars (https://www.techstars.com/): Founded in 2006 and based in the US. To date, it has made 6,030 investments, achieving 485 exits. In the past two years, the accelerator has made 888 announced investments, with 669 of these being pre-seed, representing 75.34% of the total.
3. Antler (https://antler.co/): Founded in 2018. To date, it has made 1,336 investments, with 8 exits. In the past two years, the accelerator has made 256 announced investments, with 225 of these being pre-seed, representing 87.89% of the total.
4. SFC Capital (http://www.sfccapital.com/): Founded in 2012 and based in the UK. To date, it has made 583 investments, with 18 exits. In the past two years, the accelerator has made 135 announced investments, with 75 of these being pre-seed, representing 55.56% of the total.

PreSeed Investors w/ Most Exits

Exits matter. They mean that the fund is more likely to have staying power. The list below features pre-seed investors with the highest number of exits. To qualify, investors must have allocated over 20% of their initial investments specifically to pre-seed funding rounds.

1. Y Combinator (https://www.ycombinator.com/): Founded in 2005 and based in the US. To date, it has made 6,308 investments, achieving 564 exits. In the past two years, the accelerator has made 936 announced investments, with 555 of these being pre-seed, representing 59.29% of the total.
2. Techstars (https://www.techstars.com/): Founded in 2006 and based in the US. To date, it has made 6,030 investments, achieving 485 exits. In the past two years, the accelerator has made 888 announced investments, with 669 of these being pre-seed, representing 75.34% of the total.
3. 500 Global (http://500.co/): Founded in 2010 and based in the US. To date, it has made 3,119 investments, achieving 377 exits. In the past two years, the accelerator has made 78 announced investments, with 23 of these being pre-seed, representing 29.49% of the total.
4. Right Side Capital Management (http://rightsidecapital.com/): Founded in 2010 and based in the US. To date, it has made 1,372 investments, achieving 201 exits. In the past two years, the firm has made 51 announced investments, with 27 of these being pre-seed, representing 52.94% of the total.
5. Plug and Play (https://www.plugandplaytechcenter.com/): Founded in 2006 and based in the US. To date, it has made 1,816 investments, achieving 169 exits. In the past two years, the accelerator has made 262 announced investments, with 69 of these being pre-seed, representing 26.34% of the total.
6. Liquid 2 Ventures (http://liquid2.vc): Founded in 2015 and based in the US. To date, it has made 902 investments, achieving 67 exits. In the past two years, the firm has made 141 announced investments, with 55 of these being pre-seed, representing 39% of the total.
7. Seedcamp (http://www.seedcamp.com/): Founded in 2007 and based in the UK. To date, it has made 578 investments, achieving 63 exits. In the past two years, the accelerator has made 76 announced investments, with 22 of these being pre-seed, representing 29% of the total.
8. Alchemist Accelerator (http://www.alchemistaccelerator.com/): Founded in 2012 and based in the US. To date, it has made 587 investments, achieving 56 exits. In the past two years, the accelerator has made 20 announced investments, with 12 of these being pre-seed, representing 60% of the total.

Outro

Thanks for reading!

If you’re interested in discussing any of this data, feel free to reach out on Twitter (@seidtweets) or LinkedIn.

Or if you’re a founder looking for funding — I’m an investor at Chapter One; we invest in pre-seed and seed-stage rounds — would love to hear from you!