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In the world of startups, everyone knows the script: Build your MVP, land your first customers, pitch to angels or seed funds, and hope you’ve assembled a strong team before you hit the fundraising trail. But what if your product is promising, your vision is clear, yet your team—or your traction—isn’t enough to get the “yes” you need from serious investors? Here’s a secret maneuver, straight from the private equity playbook, and most founders are missing it: Don’t wait to be acquired—merge before you fundraise.
Early-stage founders often see their gaps—whether it’s a missing technical cofounder, lack of industry credibility, or the classic “not enough sales” problem—as fatal flaws. What if, instead, those gaps made your company the perfect puzzle piece for another startup nearby? Imagine Startup A with a brilliant engineering team but limited customer access and Startup B that has deep industry experience and client relationships, but can’t quite build the product. On their own, neither gets funded. But together? Now you’ve got a startup that might actually raise a round and deliver results investors look for. And it'll likely be at a higher valuation, which can make up for the dilution each startup's founders will experience.
This is the private equity lens applied at the pre-seed stage: see the value in strategic combinations, not just in individual performance. Instead of waiting for growth, exits, and eventual PE interest, founders can initiate their own “micro-mergers” right at the start. The upside for early investors is obvious—suddenly the cap table represents real, additive value, not just a spray-and-pray bet across a portfolio of half-baked attempts. The management team is more complete. The product is less risky, more compelling, and ties together the best of both founding crews.
Forget the myth of the lone founder hero. Fundable startups are coalitions. If your team is missing a piece, go find it—don’t just recruit, look for other underdog startups to join forces with, even if it means some ego sacrifices and cap table gymnastics. For startup “tribes” in related spaces (think adjacent SaaS verticals, hardware/software combos, or industry-specific tech), now is the time to merge strengths, patch weaknesses, and approach pre-seed investors as a new, stronger entity.
Just like in a late-stage M&A process, you want some people involved in the process that both parties can trust, to help the founders of both companies get well aligned. Division of responsibilities between the new combined leadership team will need to be clearly defined. Make sure enough time is spent on ensuring that the cultural values of each company are compatible.
There's a saying in M&A that "there is no such thing as a merger of equals." That's likely going to be true in this marriage as well. The kimono dance will explore everything that each party brings to the table, and there will likely be some disagreement in this regard. Have a neutral intermediary, and maybe even a representative of each company's board of directors present, will help bring some objectivity to these delicate conversations. I've been in some of these negotiations where at the end of the day the founders shook hands on a 50/50 deal because they just couldn't agree to 60/40 or 40/60 but wanted to combine forces to create a more fundable venture. Contrary to the adage, a partnership in its simplest rendition is in fact a 50/50 split.
In some cases it may be best to bring in an outside CEO. With the combined horsepower of NewCo it may be easier to recruit a highly qualified CEO that can make it a lot easier to raise money, and to tell the 1+1=3 story about why the two startups came together from a more compelling "why I joined the company" perspective. First time founders, in particular, should avoid the CEO hot seat. The founder title is forever. The CEO position will likely be rotated well before the exit, if not repeatedly. Better for the founders to remain on the board of directors helping to choose the new CEO at each of those growth phases than to risk having to be extricated from their own company someday; that's just never a pleasant experience.
In the private equity world, dozens of fragmented little players get rolled up into a platform company, creating something bigger and more investable. Why let the acquirers have all the fun and value creation? Founders don’t have to wait for exits and white-knight buyouts—combine now, raise better, and create more value for everyone at the table from Day One.
That’s how you play the private equity game at the pre-seed stage—by recognizing that value is built from strength in numbers, complementarity, and a little bit of creative courage, long before Series A is even in sight.
