The lifecycle of a startup is often described as a linear sequence of funding rounds, from pre-seed to maturity. In reality, progression is not driven by capital alone, but by the ability to resolve successive and fundamentally different forms of uncertainty. Each stage of a startup’s development corresponds to a specific question—about the problem, the solution, the market, or scalability—and only companies that answer these questions convincingly are able to move forward.

Preseed:

The pre-seed phase is not concerned with execution, growth, or scale, but with a more fundamental question: whether a company should exist at all. At this stage, a startup is neither a product nor a business, but a set of unresolved uncertainties concerning the customer, the nature of the problem, and the solution. The purpose of pre-seed is therefore not to validate an idea in the abstract, but to reduce uncertainty in a structured manner, transforming intuition into grounded understanding before meaningful commitment takes place.

Problem discovery

Every startup idea originates from an intuition; intuitions, however, are not actionable unless they are translated into explicit, testable assumptions. These assumptions consistently concern the same dimensions: who the customer is, what problem they experience, when it occurs, and why it is sufficiently painful to influence behavior. An assumption becomes meaningful only when it is stated with enough precision to be falsified, allowing it to be confronted with reality rather than sustained through narrative.

The confrontation with reality occurs through direct interaction with customers, typically via one-on-one conversations focused on observed behavior rather than stated opinion. In the pre-seed phase, asking whether someone would use a product yields limited insight; what matters instead is understanding how people currently act, which tools they rely on, and how they respond when the problem actually arises. Individual conversations are rarely informative in isolation. Insight emerges when similar behaviors, constraints, and workarounds recur independently across multiple interviews, allowing signal to emerge from noise.

As these patterns stabilize, the problem can be structured along three dimensions: frequency, severity, and existing alternatives. If the customer already uses an imperfect solution, it doesn’t mean that the problem is solved; rather, its existence is a positive signal, as it indicates that the problem is real, recurring, and that customers are actively seeking a way to solve it.

Once the problem has been clearly structured does it become meaningful to introduce a solution hypothesis, in the form of a minimal demo such as a landing page, a short deck, or a clickable prototype. At this stage, the relevant signal is not general interest, but urgency. Expressions such as “this is interesting” carry little weight, whereas questions like “when can I use it?” or “when will it be available?” signal that the proposed solution addresses a top-three customer problem.”

MVP

The next step is to assess whether the proposed solution is the right one. This is the role of the MVP. An MVP is not a simplified version of the final product, but the minimum artifact required to test the startup’s core hypotheses, which typically concern sustained usage, effective problem resolution, and willingness to pay. At this stage, speed outweighs quality and learning outweighs scalability; building something that does not scale, relies on manual intervention, or lacks polish is often the most efficient way to achieve a rapid feedback cycle

In this sense, the MVP functions less as a product and more as an instrument for learning, designed to inform subsequent decisions rather than to impress external observers.

Cofounders

Alongside product exploration, founders must determine whether to bring in one or two co-founders. This decision should be driven by necessity rather than convention. From a skills perspective, a co-founder becomes essential when critical capabilities are missing and cannot be outsourced without slowing learning or execution. From an emotional perspective, pre-seed is a cognitively demanding phase, characterized by frequent feedback, shifting direction, and persistent uncertainty. In this context, a co-founder provides not only complementary skills, but also stability, helping to distribute cognitive load, challenge assumptions, and maintain perspective as the startup evolves.

Funding

Finally, pre-seed often coincides with the startup’s first interaction with capital. At this stage, companies are typically pre-revenue and highly uncertain, making fundraising difficult despite the relatively limited capital required. Funding may come from family and friends (often the preseed round is called “family and friends”), angel investors, crowdfunding initiatives, incubators, accelerators, competitions, or grants, while some founders choose to bootstrap in order to preserve flexibility. Regardless of the source, raising pre-seed funding requires demonstrating a clearly defined customer segment, a coherent MVP, and early signals of traction or engagement. Runways are usually short, often under one year, and investment decisions are rarely driven by metrics alone; they primarily reflect confidence in the founders’ ability to reason clearly, learn efficiently, and make disciplined decisions under uncertainty.

Some datas about preseed funding:

Sources: P101 State of Italian VC 2024 (IT, EU); Carta 2025 (US); KPMG Venture Pulse Q4 2025 (US)

– median values

Italian and European funding rounds tend to be smaller because the overall investment market is less capitalized than in the U.S., and there are fewer large venture funds able to support startups in later rounds at high valuations.

Risk appetite also plays a role. U.S. funds are generally more willing to invest heavily in small teams based primarily on vision and high potential, whereas European and Italian investors typically require clearer KPIs, traction, and more established metrics before committing significant capital.

This pattern extends to later stages as well: greater availability of capital—if deployed effectively—enables faster growth, stronger market positioning, and ultimately higher valuations.

Seed:

If pre-seed is about understanding whether a company should exist, the seed phase is about proving that it can exist as a real business. At this stage, the startup is no longer a collection of hypotheses, but it is not yet a scalable company. More specifically, the purpose of the seed phase is to transform an MVP into a stable, focused product, make a first credible entry into the market, and generate concrete evidence of Product–Market Fit, in the form of traction or early revenues.

From MVP to a Stable Product

An MVP is designed to learn; a seed-stage product is designed to deliver value reliably. This transition does not mean adding features. During the seed phase, a startup should concentrate on one, at most two essential functions—those that directly solve the core customer problem identified during discovery and that guarantee a real competitive advantage. Everything else is postponed. A seed-stage product wins not by being complete, but by being decisively better at one specific job.

The Goal: Product–Market Fit

The central objective of the seed phase is to reach Product–Market Fit (PMF). PMF occurs when a clearly defined group of customers consistently uses—and is reluctant to give up—a product because it solves a top-priority problem for them. Importantly, PMF is not proven by vision, excitement, or press, but by key metrics that summarize customer behavior.

Activation captures whether new users reach their first moment of value.

• Activation Rate = Activated users ÷ total sign-ups — Share of users completing the key event that represents initial value.
• CAC (Customer Acquisition Cost) = Total acquisition spend ÷ activated users — Cost required to acquire a user who actually experiences value.

If users do not activate, nothing downstream matters.

Retention is the strongest signal of PMF.

• CRR (Customer Retention Rate) = (Customers at end of period − new customers) ÷ customers at start — Ability to retain users over time.
• Stickiness = DAU ÷ MAU or WAU ÷ MAU — Frequency and regularity of usage.
• WAU / MAU — Degree to which the product becomes part of a weekly routine.

Retention indicates that the product solves a recurring problem and that value is delivered repeatedly, not accidentally.

Revenue metrics provide economic proof of value.

• MRR / ARR = Sum of recurring subscription revenue — Predictability of revenues.
• CCV (Customer Contract Value) = Total contract value ÷ number of customers — Economic weight of a customer.
• Repeat Purchase Rate = Customers with repeat purchases ÷ total customers — Consistency of demand.

Even small revenues demonstrate willingness to pay and reduce ambiguity for future investors.

Hiring first Employees

During pre-seed, founders ask whether they need cofounders; in seed, the question becomes whether they need employees. This shift happens when founders spend a significant portion of time on tasks that do not require strategic decision-making, repeat daily, and can be executed better by someone specialized. Over time, these activities create bottlenecks that slow execution and learning, making hiring necessary.

Early employees are not founders, but they are not ordinary hires either. They often receive equity compensation, reflecting both risk and long-term alignment, and their contribution directly shapes the company’s trajectory. Typical first hires include development roles to stabilize and extend the product, or sales roles to systematize early revenue, although the exact profile depends on the nature of the startup. A deeptech company, for example, may prioritize researchers, while a marketplace may prioritize operations.

The Seed Round

The purpose of a seed round is not to scale the company, but to fund the transition from validation to credibility. Seed capital buys time—typically 12 to 18 months—to reach milestones that make a future Series A plausible. Funding sources remain similar to pre-seed, but at this stage a new player enters the stage: venture capital funds.

Venture returns follow a power law: a small number of investments generate the majority of returns. As a result, VCs actively seek outliers—companies with the potential to produce extremely large outcomes. For a VC, a startup that stagnates is equivalent to a failure; moderate success does not return the fund. This dynamic explains both a preference for high-risk, high-return opportunities and the emergence of the seed squeeze, where large amounts of capital are deployed into fewer companies. VCs therefore look for a large Total Addressable Market, a clear and focused roadmap, and a credible explanation of how seed capital will be used to reach Series A–ready milestones.

A Note on Valuation:

A high valuation at seed may appear attractive, but it can be counterproductive. By raising the entry price, it raises expectations and makes the milestones required to justify a Series A more demanding, increasing execution risk. At seed, valuation should support progress rather than constrain it: the objective is not to maximize price, but to preserve optionality.

Sources: P101 State of Italian VC 2024 (IT, EU); Carta 2025 (US); KPMG Venture Pulse Q4 2025 (US)

– median values

**The second part of the article related to Series A startups is to be published in mid of March.

Author: Marco Carabelli