Raising investment this summer? Here's how to close deals when things slow down

Founder frustrations are high in the summer months: You want to drive your business forward but with your customers, investors and team members off holidaying, things may not move as quickly as you’d like.

This can be even more frustrating when you’re fundraising, where closing a round in a timely fashion can sometimes be the difference between getting to the next stage or closing up shop.

In this article, we offer some strategies on how to beat the summer slump and close the deals you need to soar through summer, and beyond.

Fundraising requires lining up your investors to agree to and sign your fundraising paperwork (e.g. Term Sheets, Investment Agreements and much more). Until they all agree, you can’t close your round. And if you’re raising a round from a number of angel investors, there’s a high chance that one or more will hold up your deal.

So, what’s a founder to do? By our reckoning, these are your best options:

1. Give yourself freedom to move fast with SeedLegals Flex credits
2. Receive a cash injection now, and do a funding round later
3. Close your round now with a smaller target, top-up later
4. Raise a Bootstrap Round if your investors are family or friends
5. Wait until September when you can ramp up your fundraising again
6. Get cash back with R&D tax credits to access capital without giving away equity

Let’s explore how you’d go about each of these strategies below.

Give yourself freedom to move fast: use SeedLegals Flex

It’s early on in the new tax year, so good news – investors are actively looking to invest. They invest strategically to maximise S/EIS allowance in different tax years. April marks the start of a new allowance, which is why the following few months are an active period for investors.

The only difficulty during the summer is that things might move a bit slower because people are busy and on holiday at different times, which can mean traditional funding rounds are harder to pin down..

To give yourself the best chances of closing deals, make sure you’re prepared to take investment as soon as the opportunity arises. SeedLegals Flex gives you the freedom to do this and make things as easy as possible for investors.

Flex allows you to act fast and be prepared to accommodate investors moving at different timeframes. It gives you peace of mind. There’s no need to lock in your funding strategy upfront because Flex allows you to change course anytime as investment opportunities arise – at no additional cost. It’s simple: you buy the amount of Flex credits that covers your target raise. Those credits stay valid for 18 months. You’re free to use them whenever you’re ready to close a deal.

SeedLegals Flex allows you to raise up to a specified amount in any combination of SeedFASTs, Instant Investments and funding rounds. When you purchase Flex upfront, you’re free to use all the funding strategies covered below as and when you need to.

Example

Investor X is looking to invest £20k, investor Y is looking to invest £200k. Investor X is going on holiday next week, which would slow down the round. To speed things up, you could use an Instant Investment or SeedFAST for investor X’s investment and close the deal within hours, before they go on holiday. Having Flex credits allows you to do this, and act in line with whatever you and your investors need.

Use a SeedFAST to get cash now

A full funding round requires a lot of work. You have to create an investment pack, justify your valuation, negotiate with multiple investors and more. So much more, in fact, that we’ve written a 21 step guide on completing your first funding round.

Perhaps your startup just needs a small amount of money to tide you over and you simply don’t have the time to put together a funding round. In that case, using a SeedFAST is the perfect solution. This method allows for one or more investors to put money into your business now, without the need for a full funding round.

SeedFAST is an SEIS/EIS friendly agreement, where you don’t set a valuation. Instead, your investors receive the shares when you close your next funding round. Investors are usually given a 10% to 20% discount on the next round’s share price, to compensate them for coming in earlier.

The beauty of SeedFAST is that you don’t have to wait for other investors to participate in the funding round. It allows you to take funds from individual investors as soon as they commit to your raise. So there’s no need to wait around for investors who are slower to commit to the deal. SeedFAST has become the most popular type of legal document amongst angel investors in the UK because it’s a simple two to three-page document that angel investors can easily understand and review without needing the help of a lawyer.

You can create and send out a SeedFAST on SeedLegals in less than 10 minutes and receive the money as soon as the investor has signed.

Do a smaller round ASAP, top up at your leisure

But what if you’ve already opened your round, have investors committed and are looking to close?

Whether to close a smaller amount now or wait for those final investor commitments to come in can often be a difficult decision for a founder, especially because those commitments might take much longer than expected.

If this is the case you might want to consider another agile funding option: Instant Investment. This allows you to accept new investments into your startup at any time, without the need for a new funding round. This means that instead of waiting to reach your full initial target, you can close the commitments that you have now, but with a provision that allows you to accept additional investment.

Before, it would have been a difficult decision to accept less money in the round than you thought you needed because you likely wouldn’t be able to accept any new investment without doing a new funding round.

Instant investment solves this problem because you can still accept new investments even after your round has closed. Instant Investment allows you to raise capital between rounds so that you can accept funding on a continuous basis if you like.

Raise a bootstrap round

Traditionally, closing a deal with investors could take up to three months due to back-and-forth negotiations with your investors. Professional investors often have a series of terms they will regularly require to be part of the documentation, which can hold up the deal.

When accepting investment from friends, family and people you know, however, there usually won’t be many requirements, if at all. This is why a bootstrap round could be the perfect solution when you’re short on time.

Raising a bootstrap round on SeedLegals allows you to quickly and inexpensively accept a small amount of money (up to £100k) without negotiating on complex documentation that just isn’t needed at this stage in your business.

Do a full round after the summer

If cash flow isn’t necessarily an issue for the company, founders can take advantage of the downtime in both the sales and fundraising cycle to do their homework and get investment-ready.

You can use the extra time to perfect your pitch, make sure your company is in order and get press coverage before your round (Read: How to get press coverage on a startup budget). Check out the resources below to help you prepare.

No investors? Boost your cash flow with R&D Tax Credits

Not raising as much from investors as you’d like to? Get some extra cash in with R&D Tax Credits. This strategy is especially good because it allows you to access capital without giving away any equity. You can use the cash you get back from the tax relief to achieve key milestones and boost your company valuation, so your equity is worth more when you do raise investment.

What are R&D tax credits?

If your company has spent money developing a new product or service, or significantly improved one that already exists, you could claim R&D tax credits, which can help to improve cash flow in your company.

R&D tax relief is an HMRC initiative that pays your company back a percentage of what you spend on qualifying activity for research and development. You get the money back in the form of Corporation Tax relief or, if you’re a loss-making company, as a tax credit (that is, a cash payment).

Useful resources to help you raise

Here’s some resources to help you get ahead of the game. When everyone gets back from holiday, you’ll be ready to hit the ground running. Perhaps you can even make time to give yourself a well-earned break sometime in August, too.

• Startup pitch deck: free template with investor tips
• How to pitch to investors: insider tips to get funded
• Top 10 pitch questions investors ask (from actual investors)
• How to raise angel investment in 6 steps

Video: How to raise investment in the summer

Watch the webinar led by SeedLegals funding experts. 👇 We go into detail on effective strategies to optimise your fundraising during the summer, how to warm up investors for the end of the year, and ways to secure additional cash.

Need help to choose the right strategy?

You don’t have to figure it out all on your own – we have a team of funding experts ready to talk you through your options and help you strategise the best way forward based on your circumstances. Book a call with a funding expert below. We’d love to hear from you.