Pre-Seed Investing: 7 Proven Frameworks Elite VCs Use to Identify Exceptional Founders

Pre-seed investing is not about pitch decks — it is about identifying founders with an undeniable right to win before the rest of the market catches on.

Ryan Miller BSc., MFin. | Host, Making Billions Podcast | LinkedIn

Key Takeaways

• Understand why pre-seed investing success depends on founder-market fit and domain expertise far more than technical credentials or polished pitch materials.
• Discover how top pre-seed investors use adversity signals and resilience markers to separate founders who will persist from those who will fold under pressure.
• Learn how pre-seed investing decisions are made faster by building a network of real-world industry experts rather than relying solely on formal data sets.
• Explore the deal term considerations, including SAFE notes versus convertible notes, that every emerging manager should understand before entering pre-seed investing conversations.
• Consider how trust-first LP relationship building is the foundation of every successful fund raise, and why going for the transaction before the trust typically produces neither.

Pre-Seed Investing Starts With One Filter: Founder-Market Fit

Pre-seed investing demands a clear and repeatable filter before any diligence begins, and for Joseph Alalu, co-GP of Daring Ventures, that filter is founder-market fit. In this episode of Making Billions Podcast, Alalu explains that his firm looks immediately for the founder’s unique edge, specifically what that founder knows about their market that the rest of the world simply does not understand. That specific, earned knowledge is the first and most heavily weighted variable in every pre-seed investing decision Daring Ventures makes.

According to Alalu, this approach is grounded in the belief that speed to conviction separates winners from also-rans at the earliest stage. In pre-seed investing, when no revenue exists and limited data is available, the founder’s depth of domain knowledge becomes a predictive signal for how quickly they will move, how sticky their product will become, and how compellingly they will communicate with customers. Alalu describes this as the founder’s “unfair advantage,” a term that carries significant weight inside his firm’s evaluation process.

Alalu draws a sharp distinction between what he calls “tourists” and “titans” in the founder population. Pre-seed investing at Daring Ventures explicitly targets generational founders who have lived in or around their problem space for years, not individuals testing ideas for the first time. According to Alalu, this kind of inherited knowledge, grown through a long career or deep personal exposure, is nearly impossible to replicate quickly, which is precisely what makes it valuable at the pre-seed investing stage.

The concept of founder-market fit has grown in prominence across the venture capital community as a framework for evaluating early-stage companies where financial data is scarce. Pre-seed investing firms like Daring Ventures apply this lens as their primary screening mechanism precisely because of how little hard data is available at that stage. The filter is designed to surface signal quickly and reduce time spent on founders who cannot demonstrate a credible right to win.

Pre-Seed Investing Decisions Overweight Grit and Underweight Prestige

Pre-seed investing at the Daring Ventures level requires a deliberate calibration of which founder signals to amplify and which to dismiss. Alalu is explicit on this point: his firm intentionally overweights a founder’s relationship with adversity and underweights prestige, pedigree, and technical credentials. In pre-seed investing for B2B software, he argues, the ability to absorb rejection from customers and adapt in real time matters far more than where a founder went to school or how impressive their resume looks on paper.

The reasoning Alalu offers is grounded in market reality. Customers, he explains in this episode, are ruthless with their purchasing decisions. They do not care about a founder’s academic background or family connections — they care only about whether a product solves their problem at a price they are willing to pay. Pre-seed investing that backs founders with demonstrated grit is, in his framework, backing founders who are less likely to fold when that inevitable customer rejection arrives.

Alalu also addresses the shift in what technical ability means in the current pre-seed investing environment. With AI dramatically lowering the barrier to building software, the scarcity that once made engineering talent a top-weighted variable has largely dissolved. Pre-seed investing today, according to Alalu, rewards the founder who knows what to build and why, not simply the founder who can build it. That cognitive edge, combined with tenacity, is what his firm now considers the primary predictor of venture-scale outcomes.

This perspective aligns with broader research on resilience as a performance driver in high-stakes environments. Pre-seed investing frameworks that incorporate adversity screening are increasingly common among top-tier early-stage funds precisely because the founding journey involves repeated, often severe setbacks. Identifying founders who have already demonstrated the capacity to recover and reorient is one of the few reliable signals available at the pre-seed investing stage.

Pre-Seed Investing Due Diligence: Filling Gaps Without Stalling Decisions

Pre-seed investing due diligence operates under a structural constraint that distinguishes it from every later stage of venture: the information set is always incomplete. Alalu addresses this directly in the episode, describing his firm’s approach as one built around identifying logical coherence in a founder’s story rather than searching for data certainty that will never arrive. In pre-seed investing, the question is not whether all the information is present, it rarely is, but whether the story holds together with the pieces that are available.

Alalu introduces a practical decision rule for pre-seed investing situations where data is ambiguous: if reaching conviction requires large intellectual leaps, the deal is almost certainly wrong for the fund. The goal is to identify businesses where the path from current state to venture-scale outcome is logical and linear, even if it is not fully visible. When a pre-seed investing team finds itself doing significant mental gymnastics to justify a thesis, Alalu argues, that is the signal to move to a no quickly rather than spending more time trying to convince themselves.

The specific diligence tactic that Alalu highlights for speeding up pre-seed investing decisions is the use of real-world expert networks, not formal advisors or academic consultants, but practitioners working in the relevant industry. He provides the example of calling a friend who runs a med tech distribution team while evaluating Praxis Pro, a pharma sales enablement company in the Daring Ventures portfolio. That single conversation provided faster, more grounded insight than any formal research process could have delivered in the same timeframe.

The SEC’s guidance on early-stage startup funding makes clear that the risks inherent in pre-seed investing are substantial and that investors should apply rigorous process regardless of stage. Alalu’s framework does not eliminate those risks, no framework does, but it provides a disciplined structure for reaching decisions faster without sacrificing the quality of conviction behind each pre-seed investing commitment.

Pre-Seed Investing Thesis in the AI Era: The Aperture Has Expanded

Pre-seed investing is entering what Alalu describes as an inflection point driven by artificial intelligence, one that fundamentally changes who qualifies as a viable founder. In this episode, he argues that the barrier to building software has been effectively shattered, and that pre-seed investing firms that continue to weight technical expertise as the primary founder credential are operating with an outdated lens. The pool of credible founders has expanded in a way that has not occurred since the early web era.

Alalu draws a direct parallel to the Web 1.0 moment, describing a new generation of founders who are deploying AI coding tools for the first time, discovering they can solve problems they have long identified but previously lacked the technical means to address. For pre-seed investing, this expansion matters because it introduces a category of founder, domain expert turned builder, who may be more customer-connected and market-aware than a technically trained founder who has never worked inside the industry they are now trying to transform.

The investment thesis implication Alalu draws is clear: pre-seed investing should now prioritize founders who know what to build and why, because the how has become widely accessible. He describes this as an environment where grit, resourcefulness, and market understanding have taken the front seat, qualities that Daring Ventures has already been weighting heavily, and that Alalu believes the broader pre-seed investing market is beginning to recognize as primary rather than secondary signals.

The broader impact of AI on startup formation is well documented across the industry. Pre-seed investing firms that update their founder evaluation frameworks in response to these changes are better positioned to identify founders who fit the new model of company building, one where the competitive advantage is insight and tenacity rather than exclusive technical capability. Alalu’s thesis represents a deliberate response to this structural shift in the pre-seed investing environment.

Pre-Seed Investing Deal Sourcing: Presence, Reputation, and Inbound Flow

Pre-seed investing at volume requires a deal sourcing engine that surfaces the right founders consistently, and Alalu is specific about what that looks like in practice for Daring Ventures. The strategy begins with physical presence: both Alalu and his partner Maddie Coleman attend founder events two to four nights per week in the New York and DC ecosystem, building relationships with founders, representing their portfolio, and spreading their thesis through direct, repeated engagement. Pre-seed investing deal flow, in their experience, is a function of relentless community presence rather than passive inbound marketing.

The results Alalu describes in this episode are concrete. Daring Ventures has reviewed over one thousand inbound deals in a single year, a volume that Alalu attributes directly to the firm’s willingness to be loud, visible, and consistent about its pre-seed investing focus. Building in public, articulating a clear thesis, and refusing to obscure what the fund is looking for have created a strong resonance with the founder community that feeds the top of the pipeline with aligned candidates.

Alalu emphasizes that pre-seed investing deal sourcing is not passive. His firm gets out of New York when possible, builds relationships across geographies, and uses portfolio company visibility as a credibility signal that attracts new founders. The combination of a clear thesis, genuine community participation, and consistent public communication has allowed Daring Ventures to build a deal flow volume that most first-time funds do not achieve.

Bloomberg’s reporting on venture capital deal sourcing consistently highlights that the most productive pipelines are built through trusted networks rather than cold outreach. Pre-seed investing firms that prioritize relationship depth over transactional volume are better positioned to see deals early, before competitive dynamics inflate valuation or reduce ownership opportunities. Alalu’s approach reflects this institutional understanding applied to an early-stage context.

Pre-Seed Investing Deal Terms: What Actually Matters at the Earliest Stage

Pre-seed investing deal structure is a topic that Alalu addresses with both candor and nuance in this episode. At the stage Daring Ventures operates, most transactions are executed on SAFE notes, which are the dominant instrument in the founder community largely due to YC’s influence in standardizing them. Alalu acknowledges that SAFE notes are structurally disadvantaged as instruments, they represent a promise of a future security rather than an actual security, but he also recognizes the practical reality that pre-seed investing founders are often resistant to alternatives they perceive as complicated.

Alalu’s firm prefers convertible notes for their pre-seed investing activity because of the additional structural protections they offer, including interest accrual and more defined conversion mechanics. His reasoning is straightforward: a fund’s responsibility to its LPs requires preserving the ability to recoup capital and maintain accountability with portfolio founders. Pre-seed investing on SAFE notes, particularly at high valuations with no cap protections, can significantly impair a fund’s ability to deliver returns to the investors who backed it.

He also signals a broader market shift that he sees forming in the New York pre-seed investing environment: a growing conversation among investors about rebalancing deal terms from founder-only-friendly structures toward terms that create genuine accountability for both parties. This is not a move away from founder-aligned investing, Alalu clarifies. It is a push toward what he describes as “founder and investor effect,” where both sides of the cap table are appropriately protected and incentivized.

The mechanics of SAFE notes versus convertible notes are well documented and carry distinct implications for fund economics. Pre-seed investing managers who understand these structural differences and can have productive conversations with founders about them are better equipped to build a portfolio with the structural integrity necessary to deliver results to their own LP base. Alalu’s experience managing these conversations reflects a level of deal discipline that distinguishes institutional-grade pre-seed investing from opportunistic check-writing.

Pre-Seed Investing Capital Raising: Trust Before Transaction in LP Relationships

Pre-seed investing fund managers face the same capital raising challenges as any emerging GP, and Alalu’s experience building the LP base for Daring Ventures offers practical insight for managers at a similar stage. His core principle, echoed and reinforced by Ryan Miller in this episode, is that trust must precede the transaction in every LP relationship. Pre-seed investing funds that approach LP conversations as transactional events, prioritizing commitment velocity over relationship depth, typically find that the check never materializes, or materializes once and does not repeat.

Alalu shares a specific story that illustrates this principle with unusual clarity. The first LP check Daring Ventures received did not come from a carefully crafted pitch process or a warm introduction through an institutional network. It came from a former university alumni of his partner Maddie who had been following the firm’s LinkedIn activity, reached out through a secondary inbox, and asked to invest. The pre-seed investing lesson Alalu draws is not that pitch preparation is unimportant, it is absolutely important, but that reputation, visibility, and trust-building generate capital from directions that no pitch strategy can reliably predict.

The LP patterns Alalu describes targeting for Daring Ventures include professionals such as fractional CFOs and other high-network service providers who want to associate themselves with a fund that is genuinely embedded in the founder ecosystem. His insight is that for this LP segment, pre-seed investing fund association serves a dual purpose: it is both a financial investment and a professional positioning tool that signals proximity to innovation to their own clients and colleagues. That alignment of incentives makes LP conversations more natural and more durable.

Ryan Miller’s framework of reputation, relationship, and results, introduced in this episode as the three most valuable assets a fund manager possesses, provides a useful structure for understanding pre-seed investing capital raising at the LP level. Research consistently shows that LP capital allocation decisions are disproportionately driven by trust and relationship history. Pre-seed investing GPs who build those assets first, before seeking a commitment, consistently report better LP conversion rates and more stable fund relationships over time.

Pre-Seed Investing as an Emerging Manager: What Must Be in Place Before You Raise

Pre-seed investing as an emerging fund manager is not just a deal-making activity. It is the simultaneous construction of a company, an investment process, a pitch capability, and an LP relationship engine. Alalu is direct about this in the episode: managers who think pre-seed investing is purely about selecting founders and writing checks are underestimating the operational complexity of running a fund at the earliest stage. Every function that would normally be distributed across a team, technology, legal coordination, marketing, HR, business continuity planning, becomes the direct responsibility of the GP.

The single most important pre-fundraising capability Alalu identifies for pre-seed investing managers is pitch clarity. Not pitch polish, pitch clarity. Understanding exactly what product is being sold, what inefficiency the fund is exploiting, and why the team is uniquely positioned to capture it are the foundational elements of an investable pitch. Daring Ventures went through multiple iterations of how they presented their fund before finding the framing that resonated with LPs, even though the underlying thesis never changed. That process of refinement, what Alalu describes as “tumbling and polishing a rock,” is a necessary phase for every pre-seed investing manager regardless of experience level.

Alalu also addresses the competitive calibration required at each stage of fund raising. Pre-seed investing managers raising from high-net-worth individuals and family offices are competing for attention and capital within that specific LP universe. Managers spinning out of large funds and targeting institutional LPs like pension funds face a different competitive set and need to pitch up to that level of sophistication accordingly. The standard for what constitutes an acceptable pitch scales with the audience, and pre-seed investing managers who do not recognize that distinction often underprepare for the conversations that matter most.

The SEC’s compliance guidance for emerging fund managers underscores that operational readiness, not just investment thesis quality, is a prerequisite for fund launch. Pre-seed investing GPs who build their operational infrastructure in parallel with their investment process are better prepared to present credibly to sophisticated LPs who will conduct operational due diligence alongside investment thesis evaluation. Alalu’s experience confirms that both dimensions are real and that neither can be deferred.

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Pre-Seed Investing Portfolio Support: Doing One Thing Exceptionally Well

Pre-seed investing does not end when the check clears. According to Alalu, that is precisely when the real work begins. Daring Ventures operates as a small two-person team, and rather than spreading post-investment support across dozens of functions at low quality, Alalu and Coleman have made a deliberate choice to concentrate their portfolio value-add on a single high-leverage activity: helping founders raise their next round. In pre-seed investing, the bridge from first institutional check to seed fund is one of the most consequential and least supported transitions a founder faces.

Alalu explains in this episode that this focus is not a limitation. It is a strategic decision rooted in where a small fund can create disproportionate impact. Pre-seed investing firms with limited bandwidth that try to cover recruiting, legal, marketing, and product strategy simultaneously often end up providing shallow support across every dimension. By concentrating specifically on fundraising readiness, Daring Ventures ensures that every portfolio company receives meaningful preparation for the investor conversations that will determine whether the company survives to the next stage of development.

The implication for pre-seed investing fund managers building their own portfolio support model is clear: depth in one area consistently outperforms breadth across many areas at the earliest stage. Founders do not need a fund that does everything at a mediocre level. They need a fund that does the most important thing at an exceptional level. According to Alalu, for a pre-seed investing firm, that most important thing is almost always helping portfolio companies access the next layer of capital.

This concentrated support model reflects a principle well documented in Harvard Business Review research on high-performance small teams. Pre-seed investing managers who identify their highest-leverage contribution and build their post-investment operating model around that single function are better positioned to deliver repeatable value creation to their portfolio without burning out the GP team or diffusing energy across activities that do not move the needle at the stage they operate.

Pre-Seed Investing Fund Managers: Why Pitch Clarity Matters More Than Pitch Polish

Pre-seed investing fund managers entering the market for the first time face a capital raising challenge that mirrors the one their own portfolio founders face, and Alalu addresses this symmetry directly in this episode. The most important pre-fundraising capability for any emerging manager is not a polished deck or a sophisticated data room. It is pitch clarity: a precise, defensible answer to what the fund does, what inefficiency it exploits, and why this specific team is positioned to capture it better than any other manager in the market.

Alalu describes the refinement process Daring Ventures went through before landing on its current framing as an iterative, sometimes humbling experience. The underlying thesis never changed, the fund always targeted founder-market fit and domain expertise in B2B software for regulated industries, but how that thesis was communicated to LPs required multiple cycles of compression, simplification, and honest feedback before it resonated. Pre-seed investing managers who expect their first draft pitch to close capital are consistently disappointed, and Alalu is candid that the tumbling process is not optional for anyone entering the GP seat.

He also draws a sharp distinction between the LP audiences that different managers should be targeting based on their own background and stage. A first-time pre-seed investing manager raising from high-net-worth individuals and fractional executives is preparing for a fundamentally different conversation than a manager spinning out of a major institution who is pitching pension fund allocators. The sophistication standard scales with the audience, and managers who underestimate that gap often arrive underprepared for the conversations that carry the most capital and the most reputational consequence.

Forbes reporting on LP fundraising for emerging managers consistently highlights that clarity of thesis and specificity of target market are among the top factors LP investors cite when explaining why they committed to a first-time fund. Pre-seed investing GPs who invest the time to refine their pitch until it communicates without effort, not just to sophisticated institutional allocators but to high-net-worth professionals who may be hearing about alternative assets for the first time, consistently report shorter fundraising timelines and stronger LP conviction at close.

Pre-Seed Investing Capital Raising Comes Down to Reputation, Relationship, and Results

Pre-seed investing fund managers who approach LP conversations as pure sales interactions are operating with a fundamentally flawed model, according to both Alalu and Ryan Miller in this episode. The framework Miller introduces, reputation, relationship, and results as the three core assets of any fund manager, applies with particular intensity at the pre-seed investing stage, where the fund’s track record is limited and the GP’s personal credibility must carry much of the weight that performance history would carry in a more established fund.

Alalu illustrates this principle through the story of Daring Ventures’ first LP check, which arrived not through a structured pitch campaign but through the LinkedIn presence his partner Maddie had built over time. A former university alumni had been observing the firm’s public communications, reached out through a secondary inbox, and asked to invest. That outcome, Alalu explains in this episode, is what happens when pre-seed investing managers prioritize visibility and authentic relationship building over transactional outreach, capital finds its way to managers who have already demonstrated that they belong in the space before the pitch conversation ever begins.

The LP profile that Alalu describes targeting reflects a nuanced understanding of how pre-seed investing fund affiliation creates dual value for certain professional segments. Fractional CFOs and similar high-network service providers are not just writing checks as passive financial investments. They are associating themselves with a fund that positions them as connected to innovation in front of their own clients. For a pre-seed investing manager building an LP base, recognizing and speaking directly to that dual incentive can transform an LP pitch from a standard capital conversation into a genuine alignment-of-interests discussion.

The Wall Street Journal has reported extensively on how emerging manager fundraising timelines have lengthened in recent cycles, making LP relationship depth more important than ever. Pre-seed investing GPs who build trust before they seek a transaction, by publishing their thesis publicly, showing up consistently in the founder ecosystem, and communicating results transparently to their existing network, are creating the conditions for LP capital to flow toward them rather than requiring them to chase it. That inbound orientation, Alalu argues, is the sustainable model for pre-seed investing fund building at every stage of a manager’s development.

Pre-Seed Investing Requires Operational Infrastructure Built in Parallel With Investment Process

Pre-seed investing is often discussed exclusively through the lens of deal selection, but Alalu is direct in this episode about the operational reality facing every emerging GP: running a fund is simultaneously running a company. From legal coordination and technology infrastructure to business continuity planning and LP communications, the pre-seed investing manager who focuses only on finding and backing founders while deferring operational build-out is creating risk that sophisticated LPs will identify and penalize during due diligence.

The parallel construction of investment process and fund operations is not optional for managers who want to be taken seriously at the institutional LP level, according to Alalu. Pre-seed investing GPs who present a compelling thesis but cannot answer basic questions about their operational controls, compliance infrastructure, or reporting systems are communicating a level of organizational immaturity that undermines confidence in their ability to manage LP capital responsibly. That gap is one of the most common and most avoidable reasons that first-time managers fail to close LP commitments even when their investment thesis is strong.

Alalu’s broader message for pre-seed investing managers in this episode is one of comprehensive preparedness, an acknowledgment that the GP seat demands competence across dimensions that have nothing to do with founder selection or deal structuring. The managers who succeed at building durable pre-seed investing franchises are the ones who treat fund operations with the same seriousness they apply to their investment process, recognizing that LPs are evaluating both with equal rigor.

The SEC’s compliance framework for registered investment advisers and fund managers provides foundational guidance on the operational standards that funds must meet as they scale. Pre-seed investing managers who build toward those standards from day one, rather than retrofitting compliance infrastructure after the fund has already launched and raised capital, are better positioned to withstand LP operational due diligence and to demonstrate the institutional credibility that separates serious managers from opportunistic ones. That operational foundation, Alalu suggests, is as much a part of the pre-seed investing business as the check-writing itself.

About the Guest

Joseph Alalu is co-GP of Daring Ventures, a pre-seed investing stage venture capital fund focused on B2B software companies operating in people-process-paper-heavy and regulated industries. He and his business partner Maddie Coleman built the fund’s deal sourcing engine through active community presence in the New York and DC startup ecosystems, reviewing over one thousand inbound deals in their first year of operation. Joseph is active on LinkedIn under his full name and publishes the firm’s investment perspective on their Substack at writing.daringventures.vc.

Alalu brings a background that includes experience on Wall Street and a demonstrated history of helping non-traditional candidates enter competitive institutional environments. His approach to pre-seed investing draws on financial experience and a deep conviction that founder character and market insight, not pedigree or technical credentials, are the most reliable predictors of venture-scale outcomes at the earliest stage of company building.