Diligence at the Pre-Seed

Every pre-seed fund goes about their diligence differently. Yet, there are common, "more tactical" areas that matter to most and relate to the financing, cap table, etc. Make sure to get these right.

At the pre-seed, there typically isn’t too much to diligence yet.

Thus, every pre-seed fund goes about their diligence differently. And like everyone else, we’re also constantly refining what our process looks like.

Between founders, market and actual idea, we put most emphasis on the founders and how they think, then the market / major trends and only then the actual ideal as a lot is likely to change even over the next ~24 months.

Questions we answer along the process include:

• Who is the customer / what is their problem / what are they currently using to address this problem?

• What is the startup’s UNIQUE insight and their solution?

• Why now?

• Why them?

• What stands out as well as big open topics / questions /risks?

• The financing round?

We also make sure the startup fits within our investment scope which includes:

• Raising their 1st round of funding of <$2M

• Originated in the US or Canada

• Team of strong product builders with 1+ technical (co-) founder(s)

• We can buy 5% - 10% ownership at a <$10M post money valuation

• Has a B2B business model in a space we can wrap our head around

In addition, there are what matters too is more “tactical” topics we dive into around ownership / cap table / financing / expenses / corporate structure, etc.

For those, I highly recommend reading the piece linked below from

Charles Hudson

Venture Reflections

newsletter.

He does a great job at articulating what’s important there - worth a read as we see e.g. cap tables that we can’t invest in without a major clean up first way too often.

PS: Most of these are also highly relevant for Seed rounds and beyond.

Due Diligence Checklist for Pre-Seed Companies

findfunding.vc ⭐ funder spotlight

findfunding.vc is our open sourced database of early stage VCs to help founders find the right investors. Check it out.

If you're building a technically defensible and / or science-led business, here's an investor you have to know.

This week's findfunding.vc spotlight is on Ariana Thacker from

Conscience VC

. Ariana is:

• 🤠 Austin based

• 📢 Author of the great founder goodie bag (on conscience.vc)

• 👩‍🔬 Chemical engineer turned investor

• 🇾🇪 Mom's family is from Yemen

For their founders, Ariana and the Conscience team are very responsive and always make time. They are partners who not only provide intros and feedback, but also do the deep level of diligence necessary.

✉️ To get in touch, reach out to Ariana via conscience.vc

For more, check out our funder spotlight card below along with Conscience VC's profile on findfunding.vc

Until next week,

Pascal