Are You Even Ready for Pre-Seed Investors?

In 2024, startups in India raised just over ₹9,000 crore through seed funding, according to an Inc42 report, with around 430 startups participating. The year before that, the number was close to 470.

And yet, if you spend even a little time on social media, it feels like everyone is raising money. Every other day, there’s a post that reads something like, “Thrilled to announce we’ve raised $1 million in our pre-seed round!”

Chances are, you’ll see a lot more of those in the months to come. Because in 2025 alone, over 1,00,000 tech startups are expected to be launched in India, along with thousands of other non-tech companies.

So it’s only natural to wonder, “I have an idea too. Should I start pitching to investors?” If other founders are doing it, why shouldn’t you?

While tens of thousands of companies may get registered each year, only a tiny fraction manage to raise capital. Even if three times as many startups raised pre-seed as seed rounds, that’s still only around 1,200 out of more than 70,000 tech startups last year.

That puts the success rate of firms raising capital at under 2.5%. At the pre-seed stage, investors aren’t backing ideas; they’re backing evidence of potential.

Even at this early phase, they want to see that you’ve taken an idea and started doing something with it. That you’ve spent time understanding the problem, talking to real users, testing a version of your solution, and learning from the process.

The proof of thinking doesn’t need to be flashy. But it needs to be there.

Before you send out your deck or jump on calls with investors, it might be worth asking yourself: Are you ready to raise?

An Idea Is Not Enough

An idea is exciting. It’s where everything begins. But when it comes to raising money, especially at the pre-seed stage, an idea on its own doesn’t cut it.

If the problem is real and the market is large, investors will likely line up to support you. However, the truth is that what investors really want to see is what you’ve tried to do with the idea. Even if it’s early, even if it’s scrappy, they want to know that you didn’t just spot a problem, you started solving it.

Take Razorpay, for example. 

Today, we know it as one of India’s top fintech companies, valued at over $7B and preparing to go public. But back in 2014, it looked nothing like that. 

Shashank Kumar and Harshil Mathur had just quit their campus placements to start a crowdfunding platform. That was their first idea. It sounded promising on paper. However, in their attempt to build it, they encountered a roadblock, as there was no easy way for users to make online payments. 

Setting up payment gateways was a long, paperwork-heavy process, especially for small startups.

They realised the crowdfunding idea wasn’t going anywhere, but the deeper problem was very real. Startups and online businesses couldn’t accept payments easily. So instead of pushing a broken idea, they pivoted. 

They decided to build the solution they needed: a clean, developer-friendly payments platform. However, they didn’t start by raising a large round. They onboarded businesses manually, tested their product with real users, and proved that it worked. 

Only then, once they had that early validation, did they go out and raise a modest preseed round of $120,000 in 2014/15. That was the beginning of what Razorpay is today.

Porter is another example.

The company you know now as a leading logistics platform started with two people and a Google Sheet. 

The founders, Pranav Goel and Uttam Digga, noticed how many small trucks were sitting idle on the roads. At the time, they were working at JP Morgan, but they couldn’t shake the idea that there was a better way to manage intra-city logistics. 

They spoke to over 500 truck drivers and discovered the extent of inefficiency in the system. Most trucks were running just one or two orders a day, even though they were capable of handling more.

Instead of jumping straight into product development, they started manually. One of them onboarded drivers, the other found customers. No app. Just phones and spreadsheets. However, even in that form, the model was effective. Customers got reliable service. Drivers earned more. 

The company began processing thousands of bookings and had hundreds of paying customers, all before developing a proper tech product or securing significant funding.

What stands out in both of these stories is that the founders didn’t raise capital based solely on their ideas. They built conviction the hard way by doing the work. They listened to users. They tested assumptions. They showed results, however early or imperfect. And that’s what got investors interested.

Because the signal investors are looking for isn’t just in the pitch or the market size. It’s in the effort already made. They want to know that you’re not just dreaming, you’re building even if it’s small even if it’s messy.

If your thinking right now is, “Once I raise money, I’ll start building,” you might need to pause. 

At the pre-seed stage, it’s not about how polished your pitch is. It’s about how far you’ve taken the idea without external capital. The most expensive form of capital is your own time, entirely internal to you.

Who’s Waiting for Your Product?

You have an idea, and you believe there’s a market for it. But the real question is, who is waiting for your product? Who are the people who will not only try it but keep using it and pay for it?

This is one of the most important questions to answer before you even think about raising money.

Investors are not just interested in a big market (commonly referred to as the Total Addressable Market). They want to know who your first customers are, why they need your product, and how you plan to reach them. Without clear answers to these questions, your fundraising journey will be significantly more challenging.

Let’s take Nykaa as an example.

Falguni Nayar, the founder of the company, had an impressive background. She was a former investment banker who had worked at leading financial institutions, including Kotak Mahindra Capital Company. With that kind of experience, she could have easily raised money based solely on a strong pitch. But she didn’t. 

She knew investors would want more than just a great profile and a bold vision. They would like to see whether real customers were ready to buy. So instead of jumping straight into fundraising, she focused on understanding exactly who her customers were.

Nykaa did not launch as a broad e-commerce platform. It focused specifically on urban women looking for premium beauty products that were difficult to find in India. She was not trying to sell to everyone. 

She knew exactly who would benefit from her offering, and more importantly, she ensured these customers were ready to make a purchase.

By the time Nykaa raised its first round of funding, the company had already built strong traction.

By August 2013, they were processing around 3,000 orders every month, with an average order value of ₹400. That came to ₹12 lakh in monthly revenue. This was absolute proof of demand. Investors could see that people were already paying for what Nykaa was offering. That is what gave them the confidence to invest.

Now imagine a founder without this kind of clarity. They might have an interesting idea, but they haven't taken the time to figure out who their first customers are. They might talk about a massive market or huge potential, but investors will not be convinced by broad statements alone.

Without a clearly defined audience, it is challenging to establish long-term value.

To build conviction, you need to know who will buy your product, why they will choose it, and what will make them come back. Are you solving a real problem? Have you spoken to potential users and tested your assumptions? Investors want to know that your product is not just exciting on paper but genuinely needed by real people.

If you cannot name your first 10, 50, or 100 customers, it is too early to raise.

Because no matter how great your idea sounds, that alone is not enough. The real question is, who is waiting for your product?

Knowing the answer will make all the difference when it comes to raising capital.

Do You Even Know What You’re Raising For?

It is easy to assume that once you have a good idea, the next logical step is to raise money. Obtaining funding will enable you to move faster, hire a team, develop the product, and begin scaling. And on the surface, that sounds right.

But here is the thing. Investors do not fund startups simply because the founder wants to raise money. They fund startups that know exactly why they are raising. If you cannot clearly explain how the money will help you, you are not ready to raise.

Let us go back to Nykaa.

By the time Nykaa raised its first institutional round of ₹20 crore, the company already had solid traction. They were processing 3,000 orders per month with an average order value of ₹400. That means they were already generating ₹12 lakh in monthly revenue. 

This was not an experiment anymore. It was a functioning business.

And the plan for the funds? It was very clear.

They wanted to scale their inventory, bringing in over 300 brands and 10,000 products. They had plans to invest in content through Nykaa’s BeautyBook and YouTube to educate and engage customers. They also wanted to improve their tech and logistics, and even open their first offline store at Delhi Airport’s Terminal 3. These were not vague ideas. These were defined steps backed by customer data and real demand.

This is what investors are looking for. Not just ambition, but a clear view of what the money will help you achieve.

On the other hand, many founders raise money before they have this clarity. They end up hiring too fast, spending on ads without understanding their retention, or building a product without validating if users really want it. 

When the money runs out, they realise they have not moved forward. The business looks the same, except now it is under pressure to raise again.

The goal of fundraising should not be to stay alive. It should unlock growth that was already underway.

So before you start reaching out to investors, ask yourself a few honest questions. What is the primary milestone that this money will help me achieve? How will I know if I'm using it effectively? And if I don't raise it right now, can I still make progress, even if it's slower?

Raising money is not the win. Using it well is. And that only happens when you know precisely what you are raising for.

So, Are You Ready?

Raising pre-seed capital is not a milestone to celebrate. It is a responsibility that should be taken seriously. It is not about convincing investors. It is about showing that you have done the work.

Startups rarely fail because they cannot raise funds. They fail because they were raised before they were ready.

Investors do not fund ideas. They fund signs of real progress. They back founders who have built something, no matter how small, because that is what sets them apart from those who are experimenting and those who are building a business.

If you have put in the work, tested your idea, understood your customer, and know what you will do with the money, then yes, you are ready.

But if you are still figuring things out, or raising just because everyone else is, take a step back. Fundraising is not a race. The best founders raise when it matters. The best companies are built on clarity, not speed.

And when you do raise, do not be the founder with only a pitch deck. Be the one with real progress, real users, and a real plan.