The plight of pre-seed founders can seem like a Catch-22. Founders need traction to get funding, and funding to get traction.
Crossing this chasm is a founder's first and fundamental role. From a funding standpoint, in the earliest stages, personal resources and connections substitute for traction, so founders rely on personal finances and their immediate personal and professional network for "friend and family" stage funding. Operationally, I have seen founders stretch limited resources to maximize traction in two ways:
1 - Use Equity To Build Out A Team and Move The Venture Forward. I have seen clients make amazing progress with teams of co-founders, advisors and other contributors compensated mostly or solely in equity. They have then leveraged product and user traction, and the quality of their team, to attract angel and seed investment. It works not just because of traction, but because founders have demonstrated the ability to persist, persuade and lead.
2 - Launch A Streamlined Initial Product and Keep Refining It. Do what it takes to build a basic version of your product and launch it to a cohort of initial users in your target market. Leverage the user feedback to test assumptions, refine the product, improve engagement, generate compelling case studies and acquire initial paying customers, all of which go a long way to attracting both talent and investment. Y Combinator has a terrific article here discussing in more depth the virtues of launching quickly, working closely with users, and doing what's necessary to make it indispensable, even if it means Doing Things That Don't Scale.