On the pre-seed stage, startups are sometimes little greater than a pitch deck, a founding group, and some early indicators of promise. Whereas each alternative is exclusive, skilled buyers start sample matching from the very first assembly. They’re scanning for indicators—optimistic and detrimental—that assist them assess founder-market match, readability of imaginative and prescient, and potential for execution.
To make sense of early-stage ambiguity, VCs depend on psychological shortcuts—name them “flags.” These are indicators that assist us determine whether or not to lean in or cross. Inexperienced flags spark curiosity and momentum within the course of. Purple flags, however, can halt a deal earlier than it begins. It’s not an actual science, however over a whole lot of conferences, these patterns type the spine of early-stage decision-making.
Whereas each case it’s totally different, I believe most pre-seed buyers would agree with this non-exhaustive checklist.
? Inexperienced Flags: What Makes Us Lean In
1. Scrappy traction:
Whether or not it’s income, a rising waitlist, or sturdy person engagement on a prototype—early traction with little spend reveals resourcefulness and indicators product pull.
2. Mental honesty:
Founders who’re upfront about unknowns—saying issues like, “We don’t know X but, however right here’s how we’re testing it”—present they’re data-driven learners, not dogmatic sellers.
3. Founder perception:
We search for groups with a deep, first-principles understanding of the issue they’re fixing—usually stemming from private expertise or obsession.
4. “Why now?” readability:
Timing is all the pieces. Nice founders can articulate what modified on the planet—technologically, culturally, or economically—that makes their concept pressing immediately.
5. Bias to construct and ship:
Early-stage winners transfer quick. Founders who launch, take a look at, and iterate with velocity sign excessive executional velocity.
6. Sturdy command of the market and numbers:
Even pre-revenue founders ought to know their TAM, aggressive panorama, and buyer persona chilly. Sloppiness right here raises alarms. My very own pet peeve – if English shouldn’t be your first language, that’s completely okay! however ensure you don’t have apparent typos…
? Purple Flags: What Makes Us Hesitate
1. Chasing developments with out depth:
“We’re constructing an AI app for Gen Z creators” would possibly sound buzzy, but when there’s no distinctive angle or perception, it’s simple to dismiss.
2. Fuzzy GTM technique:
In case your go-to-market boils right down to “We’ll run some advertisements” or “It’ll go viral”, we have to hear a clearer path to buyer acquisition.
3. Fundraising over product:
When the dialog is extra about future rounds than product milestones or person ache, we fear the main target is misplaced.
4. Founder friction:
Interpersonal dynamics matter. If co-founders interrupt or contradict one another consistently, it indicators bother forward.
5. No proof of studying:
Even with out traction, founders needs to be speaking to prospects, recruiting expertise, or iterating on the thought. Stagnation is a crimson flag.
6. Lacking crucial expertise:
A tech startup with no technical co-founder—particularly one which absolutely outsources improvement—raises execution dangers.
Not precise science, but simple to be ready
Pre-seed investing is finally about backing individuals who can navigate uncertainty, be taught shortly, and execute with urgency. Concepts will evolve. Markets will shift. Enterprise fashions will pivot. However the founders, their ardour, curiosity and skill to make issues occur and execute relentlessly, is what’s going to make buyers get above all.
For founders in search of pre-seed funding: it’s by no means to early to get suggestions and as pre-seed buyers, there aren’t any ‘similar rule applies to all’. We’ve backed founders that already had traction and a product pre-investment and we’ve backed groups with a loopy concept, pre-traction. In case you’re an Israeli founder constructing an AI-native startup (each B2C and B2B), we’d love to attach.
