Is it better to raise pre-seed capital pre or post revenue?

Question

Traditional advice says it's better to raise capital post-revenue, but there is an argument to be made that a pre-seed round is more about the story and the team, and revenue actually gives investors something concrete to compare to other more established companies.

As Russ Hanneman (douchey investor in the show Silicon Valley) says, "If you show revenue, people will ask 'how much?' and it will never be enough. But if you have no revenue, you're a potential pure play."

CY Zhou · Accepted Answer

Raising pre-seed capital pre-revenue can provide you with the runway to develop your product without immediate financial pressures, but having post-revenue traction can significantly de-risk your startup for investors. Ultimately, it depends on your current stage and the strength of your business plan.

Answer

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Matty Reed · Answer

@olenabomko this was a useful thread, thanks for sharing!

Mike Fne · Answer

Traditional advice often emphasizes raising capital post-revenue because it provides concrete financial metrics for investors to evaluate. However, a strong case can be made for pre-revenue funding, especially during a pre-seed round, where the focus is on the story, vision, and the team behind the venture. At this stage, the potential for growth and innovation is often more compelling than existing financial performance. Russ Hanneman's quote from "Silicon Valley" humorously underscores a real dilemma: showing revenue can lead to scrutiny and comparisons with more established companies, possibly diminishing the perceived potential. In contrast, a pre-revenue startup can be seen as a "pure play," offering investors the allure of untapped potential and the excitement of early-stage investment. In essence, raising capital pre-revenue allows the focus to remain on the narrative of innovation and future growth, potentially attracting investors who are more interested in the long-term vision rather than immediate financial returns. https://fintechzoomcrypto.com/ca...

Matty Reed · Answer

@lightfield yes it feels like a bit of a "chicken and egg" situation. We need the capital most before we have revenue, but the capital is easiest to obtain once we have revenue.

Raising a pre-seed on just an idea very difficult. Whatever traction we have is only a proxy for actual paying users

If we have significant revenue growth, we don't really need outside investment, but it will be MUCH easier to get.

Best case scenario seems to be finding an angel that believes in our mission and is willing to gamble on us.

Is it better to raise pre-seed capital pre or post revenue?

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