What investors look for in a pre-seed startup

When you're raising a pre-seed round, investors aren't looking for a fully formed business—they're looking for the raw materials that will one day become a great company.

The tricky part is that those raw materials aren’t always easy to measure, especially in a startup that might not even have a product yet. It’s less about what you've done and more about the potential you have.

So what do investors look for at the pre-seed stage?

Based on countless conversations with founders and investors we’ve had at Stone & Chalk, these are a few key things that stand out.

1. Evidence the problem exists

The first thing investors want to know is if you're solving a real problem. Many founders pitch ideas they find interesting, but not all of them address a pressing need.

A compelling story about how you came up with the idea might grab attention, but it won't close the deal. What will? Evidence.

Investors want data showing that the problem is real and that it affects enough people to justify building a business around it.

You don’t need to have built a full product to demonstrate this. Customer interviews, surveys, or industry research can provide the validation that the problem you’re solving isn’t just a figment of your imagination.

And here's the secret: you don't have to prove the problem is enormous for everyone; you just need to prove that it’s big enough for a small group of users. That’s the first step.

After that, the key is to show how that small group is a gateway to something much bigger.

2. Some form of market and product validation

You might not have a product yet, and that’s fine. But you need to demonstrate that there’s at least some level of demand for what you’re building.

One of the best ways to show this is with a waitlist. If hundreds (or thousands) of people have signed up to be notified when your product is available, that's a great sign.

Even at the pre-seed stage, it helps to have some evidence that your idea isn't just a hunch.

Investors want to see that people are raising their hands, metaphorically speaking, to say, "Yes, I want this."

A waitlist shows that people are interested, and more importantly, that they trust you enough to give you their contact information before you've even launched.

A waitlist isn’t the only form of validation, though. Early partnerships, letters of intent, or even small-scale tests of your product can all count. If you can show investors that your idea has some traction—even if it’s limited—you’re ahead of most other preseed startups.

3. A big enough market

No matter how brilliant your solution, if the market isn’t large enough, it won’t matter. This is a core truth investors live by: the size of your market sets the ceiling for your potential.

At the pre-seed stage, you don’t need to have captured a large portion of the market (you probably haven’t even launched yet), but you do need to show that the opportunity is big enough to justify the risk.

A mistake many founders make is narrowing their focus too much. They create something so specific that even if it works, there’s no room to grow. Investors are more likely to take a bet on startups that can expand into larger adjacent markets or create entirely new ones.

However, you don’t need to go overboard with market size estimates.

The market doesn’t need to be a trillion-dollar opportunity, but it should be big enough that, if everything goes right, you can create a significant business. That means finding a balance between ambition and realism in your projections.

4. A clear path to revenue

Investors want to know how you plan to make money.

You don’t have to have revenue yet, but you should be able to outline a clear path to it. This might seem obvious, but you'd be surprised how many founders struggle to explain how their startup will eventually turn a profit.

The key here is clarity. You should be able to describe in simple terms how your company will generate revenue, who will pay you, and why.

Investors know that pre-seed startups will pivot and evolve, but they want to understand the initial monetisation hypothesis.

Are you planning to charge consumers directly, offer a subscription, or generate revenue through partnerships?

The specifics of your plan may change, but having a clear (if early) view of how you’ll capture value will give investors confidence that you’re thinking beyond just building a cool product.

5. The team

If there's one thing that every investor agrees on, it's this: the team matters more than anything else at the pre-seed stage.

Why? Because most startups will change direction multiple times before finding something that works. The only constant is the team.

Investors aren’t betting on your current solution—they’re betting on your ability to find the right solution, even if it means pivoting.

So what makes a great team at the pre-seed stage? First, they want to see that you have the right skills to tackle the problem you’re solving. This might mean technical expertise, industry experience, or a deep understanding of your customer.

It’s also a plus if the team has worked together before. Co-founder conflict is one of the leading causes of startup failure, so investors want to know that you can weather the storm together.

But beyond skills and experience, investors are looking for hustle and passion. Building a startup is hard. It takes long hours, endless problem-solving, and resilience in the face of failure. Investors want to see that you have the grit to keep going when things inevitably get tough.

In other words, the best teams combine three things: relevant skills, a deep commitment to the problem, and the hustle to keep moving forward, even when things aren’t going according to plan.

Final thoughts on what investors look for in startups

While every element we’ve discussed is important, two stand out as the most critical: team and market. Because in the long run, a great team and a large market are the two things that can overcome almost any other obstacle.

A great team will find a way to solve the problem, even if it means pivoting multiple times. And a large market means that, if the solution works, the company can scale to a significant size.

In many ways, these are the two things that investors are really betting on: they’re betting that the team will be able to figure out how to solve the problem, and they’re betting that the market is big enough to make the company a success.

So if you’re preparing to raise a pre-seed round, focus on these two things. Show investors that you have a world-class team and that you're tackling a problem in a large and growing market. If you can nail these two aspects, you’re well on your way to securing funding, even if your product is still a few steps away from reality.

Pre-seed investors aren't looking for perfection. They're looking for potential. They're looking for the sparks that could one day ignite into something much bigger.

And if you can show them those sparks—whether through evidence of the problem, early product validation, or a clear path to revenue—you’ll have a much better chance of getting them on board.