AI Startups Take Half of Pre-Seed Funding, Miami Breaks Into Top 3

Carta’s Q1 2026 report shows that the US pre-seed market is stabilizing at a projected $2.9 billion this quarter, marking the end of a two-year contraction while signaling major structural shifts in where the money goes. 

The report, based on activity from roughly 3,000 U.S. startups, highlights AI companies now absorbing an estimated 50% of all pre-seed funding, up from approximately 30% just a few years ago. 

The data signals that early-stage venture capital has entered a new phase: stable in size, but increasingly polarized in shape.

A Market Splitting at the Seams

While total pre-seed capital remains within the $2.5B–$3B range consistent with recent quarters, its internal structure is shifting sharply. 

Mid-sized rounds ($1- $2.5 million) pre-seed activity declined from 24% in Q1 2023 to just 18% by Q1 2026. Meanwhile, the number of small pre-seed rounds (up to $1 million) jumped to 35%.

A clear barbell effect has taken hold in the market: founders are increasingly raising either very small or very large rounds, while the middle ground has effectively disappeared.

According to Carta, a few massive “mega pre-seed deals” are artificially boosting total funding numbers, funneling most of the cash into a small group of AI startups.

On the financing side, SAFEs have become the dominant standard, while traditional convertible notes, or loan-like instruments that convert into equity at a future priced round, have dropped to a record low of just 7% of deals.

Geographic Shift Favors the US South

The latest data shows a quiet but notable reshaping of early-stage startup geography. For the first time, the US South has overtaken the Northeast in overall share of pre-seed activity, signaling a gradual regional rebalancing at the earliest stage of venture formation.

The Northeast’s share declined from 25.8% to 20.6%, while the South inched higher from 21.9% to 22.3%. 

Within this shift, Miami emerged as the standout growth hub, ranking as the third-largest pre-seed metro in the United States and surpassing both Los Angeles and Boston. 

It attracted $159 million in pre-seed funding, compared with $109 million in Los Angeles and $82 million in Boston.

Despite this movement, capital remains concentrated at the top. The Bay Area continues to lead with $776 million in pre-seed funding, followed by New York City at $279 million. Miami holds third place, but the broader landscape still shows a clear hierarchy, with the Bay Area and NYC in a distinct tier while other metros compete in a more fluid and shifting environment.

Why This Matters

Pre-seed funding patterns are a leading indicator of where venture and institutional capital will concentrate in later rounds. The AI sector’s accelerating capture of early-stage dollars is compressing opportunity for Web3 and blockchain startups, making fundraising differentiation more critical than at any point in the past three years.

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