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Illustration: Lazaro Gamio / Axios

Axios reported last week that two former 500 Startups partners are raising a $50 million to invest in startups at the pre-seed stage. Then came an announcement that a new pre-seed fund called Afore Capital was launching with a $47 million debut fund. But what is "pre-seed" and why is the term showing up more and more?

Short answer: Today's seed rounds are yesterday's Series A rounds, and pre-seed is the old seed.

More: Investors tells Axios that pre-seed rounds typically total less than $1 million, sometimes replacing what used to be fundraising from friends, family or individual angels. They come before more formal seed rounds that now often raise $2 million or more.

Other players include K9 Ventures, XFactor Ventures and Notation Capital.

Why now? VC firms have been raising larger funds (both seed and early stage), there are many more copycat startups (making it harder for investors to pick one) and investors taking longer to write checks (even if that means writing a bigger one to seal the deal). Moreover, seed investors want to see more evidence that a company and its idea are viable, increasing expectations of budding startups.

  • In Q2 2017, the median U.S. seed deal was $1.6 million, up from $0.6 million in 2014, according to research firm PitchBook.
  • Those increased check sizes put more pressure on seed investors to make sure startups are viable before investing.
  • The seed stage has become pretty crowded, so pre-seed is an area where new firms can find some open space.

Go deeper

Biden pledges to double U.S. climate funding to developing nations

U.S. President Joe Biden addresses the 76th Session of the U.N. General Assembly on September 21, 2021. (Eduardo Munoz-Pool/Getty Images)

Staring down a "borderless climate crisis," President Biden told the UN General Assembly on Tuesday that the U.S. will double public financial assistance to developing countries, including money to help them adapt to present-day climate impacts.

Why it matters: The failure of industrialized nations to fulfill a 2009 pledge to devote $100 billion annually to developing countries is a major impediment to a successful UN Climate Summit in Glasgow, which starts next month.

Dan Primack, author of Pro Rata
2 hours ago - Economy & Business

IPO market holds firm amid stock market tumult

Illustration: Aïda Amer/Axios

The IPO market is doing its best Alfred E. Neuman impression so far this week, refusing to entertain everyone else's worries.

The big picture: Both the Dow and S&P 500 fell nearly 2% yesterday, as investors tried to measure the fallout of Chinese construction giant Evergrande defaulting on its $300 billion in liabilities.

3 hours ago - World

Sudanese government says it put down coup attempt

Prime Minister Abdullah Hamdok (L) and Sovereign Council Chief Gen. Abdel Fattah al-Burhan. Photo: Ashraf Shazly/AFP via Getty

The Sudanese government announced on Tuesday morning that its military and security services had foiled an attempted coup from within the country’s armed forces.

Why it matters: The apparent coup attempt comes with Sudan’s transitional government — in which power is shared between civilians and generals — facing crises on several fronts two years after dictator Omar al-Bashir was toppled in a popular uprising.