Raise money in a UK company with an equity investment round.
Fixed price:
£1,199 +VAT Get this work done with Robolawyer. Fixed one-off fee includes every process and document needed to build and close your deal easily, quickly and correctly. Free call with a qualified lawyer first.
You can:
✓ fulfil promised equity
✓ set up share vesting
✓ issue new shares to investors
✓ model different pre-money valuations
✓ raise an unlimited amount
✓ raise from unlimited investors
✓ issue SEIS/EIS shares
✓ pre-authorise additional investors
Includes:
✓ SEIS advance assurance guidance
✓ BVCA 2025 style documents
✓ subscription letters for co-founders
✓ subscription agreement for investors
✓ shareholders' agreement
✓ new articles
✓ s431 elections
✓ directors' service agreements
✓ IP assignments
✓ shareholder and board resolutions
✓ Companies House filings
✓ share certificates
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- Equity investment is the process of issuing new shares in a company in exchange for cash.
- An equity investment round encompasses the entire process, referring to the earliest steps (such as setting a valuation or applying for SEIS clearance) to the day the money is in your bank account and all shares have been formally created.
- Your company may go through multiple rounds, with each round usually bigger than the last. The typical progression is pre-seed rounds to seed rounds, followed by series rounds.
- From a legal perspective, the round usually takes place on a single date - known as the closing or completion date.
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- Equity investment rounds are suitable for friends and family and VCs.
- The real question is whether it's an appropriate deal structure.
- Equity investment makes sense when the company can be fairly valued. Actually having the shares issued also enables the investors to take advantage of SEIS or EIS tax reliefs.
- On the other hand, a full round may not be the best idea if the valuation is low (because the founders will be giving up more ownership to the investors).
- The popular alternative to a full round for very early stage companies is advance subscriptions for shares.
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- In an advance round, no shares are actually issued to the investors (yet). But they will be in the future.
- Advance subscriptions are a better choice when you want to get cash in quickly.
- They require investors with a high risk appetite who believe that you can deliver.
- While SEIS and EIS can apply to advance subscriptions, you must ensure the right rules are met for the shares eventually issued to qualify.
- Convertible loan notes are out of fashion. Startups don't use them anymore because they are not SEIS/EIS compatible.
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- Technically, yes this has to be done first.
- This is because co-founders should be issued shares at their base (or nominal) value.
- The actual investors during the equity investment round will pay the market value for the shares.
- Practically, the base value shares are issued immediately prior to the full price shares.
- This is usually documented through each co-founder subscribing for shares in the company.
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- The terms of each advance subscription agreement (ASA) need to be considered first.
- An ASA will typically be included in a round where the round meets any minimum qualifying raise specified in the ASA.
- Calculating the number of shares an ASA holder gets for their money requires applying the terms of the ASA.
- Typically, an ASA investor will get more shares for his £100k than a new investor who pays full price during the round.
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- You should fill out the HMRC application form applying for advance assurance.
- You'll need to prepare a business plan or pitch deck, financial forecasts and draft legal documents that demonstrate how the deal will be structured and proving that the investors will be facing a genuine commercial risk by investing in your company.
- The process can take 2-6 weeks, but it could be quicker or take longer. It should be pretty obvious whether or not you'll get advance assurance. So don't wait around - start talking to investors and negotiating.
- At the same time, and as early as possible, prepare your application and draft legal docs. You'll probably need to resubmit them after assurance comes in.
- If there's a bottleneck to closing, it should be 'we're waiting on HMRC for advance assurance'.
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- Your pre-money valuation determines how many shares a person will get for their money.
- This impacts how much ownership you give up in exchange for the investment amount.
- Simply put: a higher pre-money valuation means less dilution for you.
- The key calculation is percentage equity sold = investment amount / pre-money valuation + investment amount.
- For example, a company with a £500k valuation that takes £100k will give up 100k / 600k = 16.67%.
- By contrast, a company with a £2.5m valuation that takes £100k will give up 100k / 2.6m = 3.85%.
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- Appropriate is what you can get investors to agree, and actually follow through on.
- There is no single formula to valuation. Whatever you choose, you need to be able to justify it.
- For early stage companies, the factors can be subjective - how strong is the team, what is the market size, how much of a moat does the tech have?
- For companies with product-market fit or other traction, what is the annual recurring revenue? What is the market rate for similar companies?
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- Preparation. Focus on getting your company 'investor-ready' before you approach anyone. This means understanding how you operate, how investment will be structured and governed. If shares need to be issued to co-founders, this needs to be planned for to ensure it doesn't hold up the full round. You'll also want to start obtaining SEIS/EIS assurance. The goal is to be prepared by understanding what's involved, having your internal documentation ready for investors to review. Can take months to sort out, so plan ahead.
- Execution. This is where you are actively pitching, generating interest and securing commitments. You start by finding investors. The main goal is to secure a primary investor who signs a term sheet. This often paves the way for other investors to join in on those terms. Can take another 3-6 months of grueling work.
- Closing. This is about making those commitments a reality - by following the procedures needed to give the agreed terms full legal effect, and requiring the investor to pay you the money. Can take ages if law firms are involved and terms are complex. Can be almost instant if you use Robolawyer.
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- Pre-money valuation. Determines how much equity you'll keep.
- The target raise. This gets added to your pre-money valuation to give you the post-money valuation.
- Vesting. What happens to someone's share if they leave the company?
- Reserved matters. What things need explicit consent from investors to be done?
- How much and from who? Who's committed based on these key terms?
- Warranties. What level of warranties will be given by founders and how exposed will they be?
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- Subscription agreement. A transactional document which details how much is being paid per share, how many new shares are being issued and to whom. Warranties are given here by the founders to the investors.
- Shareholders' agreement. This governs the ongoing relationship between the parties. It's a private document so can contain commercially sensitive information. It usually contains the list of reserved matters that investors must consent to.
- New articles of association. This is the public rule book of the company. It needs to be updated to work alongside the shareholders' agreement.
- Shareholder and board resolutions. These are procedural requirements which ensure that the existing shareholders and directors have given the proper consent for the investment to take place.
- Section 431 elections. A tax efficiency document that is required where restricted shares (ie. those with vesting schedules attached) are issued to the company's employees (including directors).
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- Appreciate that you will not be fully in control of the company anymore.
- Investors will need to provide consent for certain things to take place (eg. dilution of shares).
- An investor may have negotiated a board or observer seat.
- You will be expected to provide regular information about the state of the business to the investors.
- Investors will expect to see traction as a result of the investment. Failure to deliver on promises made during the raise may result in follow-on funding not being available, or at a drastically reduced valuation.
Robolawyer makes equity investment rounds simple.
Build terms progressively through a unique interface that prevents mistakes and confusion.
Review, amend and approve big law quality documents. Automatically share the right things with the right people. Negotiate and sign documents in real time.
Detailed guidance at every step takes the mystery - and misery - out of legal work.
❝Normally equity rounds take 2-3 months, but Robolawyer's clear steps helped us close ours in a week. Everyone from first-time to experienced investors knew exactly what to do. Distribution was seamless, signatures came back fast, and the reduction of friction was incredible.❞
Kayee Cheung
Co-founder, Edenreach
Equity investment rounds: made simple with Robolawyer.
Legal work: made simple.
Build terms, review drafts, share them, get signatures then close. Full oversight throughout.
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