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How to find investors: Tips from a VC

Published: 
Sep 2, 2022
Updated: Nov 24, 2023
Kirsty Macsween
Writer
Kirsty MacSween

Copywriter

Anthony Rose
Expert contributor
Anthony Rose

Co-Founder and CEO

Mo Saed
Expert contributor
Mo Saed

New Business Manager

In this post, we explain the funding hot-spots in the calendar year and how to make the most of them, and strategies to take an investment without doing a full funding round.

Watch: How to pitch to investors – a VC tells all

SeedLegals CEO and co-founder Anthony Rose sat down with Marc Cohen from unbundled.vc to find out how to present the perfect pitch to VCs.

Watch the video to find out how to do cold intros, find the right investors, tell a great story, and get investors on board.

Can’t watch the video? Click below for the auto-generated transcript.

  • Read transcript

Make the most of the 3 funding hotspots

At SeedLegals, we close one in every six early-stage funding rounds in the UK – more than any other service. From the data we have from all these deals, we’ve observed three spikes of fundraising activity every year:

1. End of the tax year

The weeks leading up to April 5th are busy, particularly for SEIS and EIS rounds. Investors are keen to get deals closed to make sure they get the maximum tax relief in the current tax year.

⚡ Read more: How to close your funding round before the end of the tax year

2. Just before summer holidays

Traditionally, many investors take time off in August. If your deal isn’t done by the end of July, it probably won’t be closed until September or later, hence why founders and investors are keen to complete before August.

3. Run-up to Christmas

This season gets busier for several reasons. Similar to the summer holiday shutdown, there’s a spike in activity as founders and investors race to get all the paperwork done and deals closed before taking a break for the festive weeks.

VCs are also feeling the pressure to tie up planning and reporting before the end of the year.

Another advantage of sorting out your deals before Christmas is that you’ll be ahead of other companies who aim to close in Q1 the following year, before the end of that tax year.

Christian Pankui

It’s important to note that the deadline for filing tax returns is in January. Many investors aim to complete their investments before 31 December to align with this deadline. You can use this to your advantage and increase your chances of securing necessary funds by developing a funding strategy that capitalises on the urgency investors often feel at the end of the year.

There’s another reason that initiating your fundraising round before the end of the year can help you successfully close or even oversubscribe your round. The the funding landscape tends to become highly competitive as the tax year draws to a close in April. By starting early, you can build momentum ahead of other startups planning to kick off their rounds in the first quarter,

Christian Pankui

Funding and equity strategist,

SeedLegals

    Investment essentials: how to find and win over investors

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    Ready to raise? Close deals quickly with agile funding

    A full funding round feeling a bit ambitious this time of year? No problem – at SeedLegals, we’ve pioneered a new way of raising. It’s called agile funding, and it’s changed the game for time-poor founders. Why? Because it’s…

    Faster: get deals signed, funds taken and finer details finalised later
    💪 More efficient: easier to manage alongside running your business
    🌪️ More flexible: forget the all-or-nothing priced round. With agile funding you can take a series of smaller amounts as and when you can, allowing you to grow your business as you raise

    Instead of waiting to line up a full cohort of investors for a priced round, with agile funding you can take in one-off investments. SeedFASTs (our advanced subscription agreement) are by far the most popular way to do this, followed by SeedNOTEs and Instant Investment.

    SeedFASTs are the new seed round
    In 2022, agile funding became the most popular way for companies to raise, overtaking the traditional funding round structure.

    2023 cemented the pattern. In the first half of 2023, 70% of fundraising on SeedLegals took place outside a round.

    For more eye-opening investment insights, check out the 2023 funding report.

    Go agile with SeedFAST

    You can issue a SeedFAST (our ‘advanced subscription agreement’) to new investors at any time. They allow investors to sign up to get shares in an upcoming funding round, in exchange for giving you money now.

    For a SeedFAST, you don’t set a valuation. Instead, your investors get their shares (usually at a discount) when you close your next funding round. SeedFASTs are carefully worded, easy to understand and – importantly – comply with SEIS and EIS rules.

    Because SeedFAST is so straightforward, it’s normal for investors to sign them within 24 to 48 hours of receiving the document. This means you get an instant injection of cash without weeks or months of negotiations. We explain more in this article:

    MORE: SeedFAST – how ASAs work

    For more complex deals before a round, use a convertible loan note

    If you have an investor who’s ready to invest before your round and wants interest or a return of capital, you can use our convertible loan note, SeedNOTE.

    ☝ Note: SeedNOTEs / convertible loan notes aren’t compatible with S/EIS investments.

    Investors like convertible loan notes because if your company is insolvent or looking to liquidate or wind up, debt ranks higher than equity. And this type of agreement gives investors their money back if your company fails to raise a ‘qualifying funding round’.

    MORE: SeedNOTE – how convertible loan notes work

    Top up a previous round

    If you have some investors ready to sign now but some who aren’t, with SeedLegals you can build into your funding round the ability to top up the round after it’s closed without having to get further consent from your existing investors.

    With our Instant Investment, you add terms to your round to allow you to close your round when you reach an amount you’re happy with (or the amount you’ve been able to raise right now) and then top up later, within agreed limits.

    MORE: Instant Investment – how to top up your funding round

    Bundle and benefit

    Save with Flex fundraising

    Not sure exactly how you’ll raise? SeedLegals Flex lets you create an unlimited number of SeedFASTs, funding rounds and Instant Investment top-ups for one fixed fee.

    Flex my fundraise
    Flex Start

    Two must-have documents to get ready to raise

    If you want to make the most of the momentum to close your fundraising round before Christmas, then it pays to have everything you need lined up – in particular, your SEIS/EIS Advance Assurance and Term Sheet. There’s more on these below

    Get your SEIS/EIS Advance Assurance

    A first step for many founders when fundraising is to apply for SEIS/EIS Advance Assurance. Many investors will only consider investing in a company that’s got this Assurance because it means they’ll get tax relief on their investment. Advance Assurance sets you apart from other companies as a very attractive investment opportunity. Here’s how it works:

    The Enterprise Investment Scheme and Seed Enterprise Investment Scheme allow investors to claim tax relief on the money they invest in your company. Investors can claim Income Tax relief at 50% for SEIS investments of up to £250,000 each tax year. And for the EIS, it’s 30% on investments of up to £1 million.

    At SeedLegals, our expert team can review your S/EIS application in three days or less. We can help you get your Advance Assurance fast – our success rate is 98%. Here’s how:

    MORE: Apply for S/EIS Advance Assurance

    Compile your Term Sheet

    When you start fundraising, you’ll need to prepare a Term Sheet: it’s a summary of the investment terms and a very handy tool to have ready when you’re approaching investors.

    Here’s why it’s smart to prepare your Term Sheet before you meet investors:

    • Know what you’re asking for
      When you compile the Term Sheet, you have to think through exactly what you want. This can kickstart your conversations and give you the upper hand in negotiations with investors because you’ll know exactly what to ask for.
    • Show you’re serious
      Investors who put money into early-stage businesses need to know the founders are reliable. By having your Term Sheet ready, you’ll show a level of professionalism that will set you apart from the rest.
    • Be ready to follow up
      If you’ve pitched to an investor and it seemed to go well, it can be frustrating to hear nothing for a week… or a fortnight… If you have your Term Sheet ready, you can follow up by sending over the document soon after your pitch.
    • Generate some FOMO
      When you send your Term Sheet to investors, this can imply you’re negotiating with other investors. Show potential investors you’re keen to move quickly – give them the FOMO (fear of missing out).

    On SeedLegals, you can create your Term Sheet in minutes. Select from options for each term (there’s guidance built in) and your document is generated automatically. You can then send it to potential investors via SeedLegals

    It’s normal to do plenty of negotiation about the Term Sheet because it includes so many details such as the valuation, vesting schedules, reporting requirements and founder salaries.

    💡 Tip: It’s worth putting effort in to get your first investor on board – we’ve noticed that when founders have got this first signature, it’s generally easier to get subsequent investors to sign (and therefore close the round faster).

    Talk to the funding experts

    Keen to close by Christmas? If you’re ready to make the most of pre-Christmas investor momentum, book a free call with a SeedLegals funding strategist today.


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