Pre-seed funding is broken. Not temporarily. Structurally. Early-stage startup funding has contracted sharply since 2022. Pre-seed rounds are harder to close, valuations have reset, and fewer founders are successfully raising capital despite more startups being formed than ever before. In many regions, fewer than 1 in 200 founders attempting to raise a pre-seed round succeed. [...]

Pre-seed funding is broken. Not temporarily. Structurally.

Early-stage startup funding has contracted sharply since 2022. Pre-seed rounds are harder to close, valuations have reset, and fewer founders are successfully raising capital despite more startups being formed than ever before. In many regions, fewer than 1 in 200 founders attempting to raise a pre-seed round succeed.

This is not a short-term correction. It is a reset in how early-stage capital works.

What Broke in Pre-Seed Investing

The pre-seed market was quietly distorted during the last funding cycle.

Large venture funds moved earlier, valuations inflated, and speed replaced discipline. Angel investing began to look more like institutional venture capital, even though the underlying risk profile of pre-seed startups never changed. When public markets corrected, that capital pulled back immediately.

What remained was a fragile early-stage ecosystem built on assumptions that no longer hold.

Pre-seed was treated like venture capital, without venture-level portfolios, time horizons, or infrastructure.

Why Pre-Seed Is Not Venture Capital

Pre-seed investing does not follow venture economics.

It is designed for small checks, high uncertainty, and long timelines. Outcomes come from portfolios, not individual companies. When founders are pushed to raise too much too early, and angels are pushed to behave like lead VCs, both sides lose.

This model only works in bull markets. In tighter conditions, it breaks quickly.

Why Angel Investors Matter More Than Ever

Angel investors are not a fallback source of capital. They are the natural owners of pre-seed risk.

Experienced angels invest smaller amounts across more companies and over longer time horizons. They understand that most early-stage startups will fail and that success comes from a few outliers across a diversified portfolio.

When angels are given better access, clearer structures, and modern infrastructure, pre-seed capital becomes resilient again.

The Next Cycle Will Be Angel-Led

The next generation of early-stage funding will not be driven by oversized venture funds moving earlier. It will be driven by distributed angels investing deliberately, repeatedly, and transparently.

That shift requires better systems. Faster fundraising for founders. Clearer risk framing for investors. And infrastructure that treats pre-seed investing as a portfolio activity, not a one-off gamble.

Pre-seed is broken because it outgrew its foundations.

Angels will shape the next cycle by rebuilding them.