Pre-Seed

The pre-seed stage is the very early financing of a start-up, before the actual seed round. In this phase, the focus is usually on developing an initial idea, team, or prototype. The capital often comes from founders, angel investors, or early funds. In Germany public support programmes and grants at federal and state level are added, as are participations from university initiatives and incubators. The amounts should suffice to demonstrate feasibility within a manageable period: a working prototype, first paying customers or a solid indication of demand.

Valuation plays little role at this stage because there is no basis for it. Funding therefore frequently uses convertible loans or SAFEs, which defer the final valuation to the next round and can reduce the initial documentation burden. Whether notarisation is required depends on the specific structure and must also be checked for convertible loans. Failure rates are highest at this stage, and investors consciously assume that most holdings will fail while a few very successful ones carry the result. For founders the central task is to create enough substance with as little capital as possible, so as not to negotiate the next round from a position of weakness.

Financing is often provided through convertible loans or through standardised documents, because a full priced round with valuation, notarisation and a shareholders' agreement would be disproportionately expensive at this stage. Public schemes such as the EXIST founder grant or federal state programmes cover part of this need without any equity being given up. For investors the stage is defined by a high failure rate, which is why holdings are spread widely and individual amounts kept small.

Note: This explanation is for general information only and does not constitute legal advice. The legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified lawyer.