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Should I do a bootstrap round or a seed round?

Published:  Jan 28, 2020
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Rob Winspear

Which is right for my raise?

For the vast majority of rounds that close on SeedLegals, the seed round product is the most appropriate product to choose. The simple explanation is that our seed round offers a far more comprehensive set of key deal terms than what is available within our bootstrap round and nearly all investors familiar with venture capital investments will want to see at least some of these additional terms included. 

The bootstrap round is generally only to be used by customers who are receiving investment from their friends, family members, or otherwise investors who are not particularly concerned with the commercial nuances of venture capital deal terms and really just want something formal to show a transaction has been made

What additional terms are included in our seed round?

Here is a brief list of terms that external investors will likely want to see in your funding round (there are many more available that are not listed), and that are only available in our seed round product:

  • Agile funding (additional investment post-close)
  • The ability to put an option pool in place
  • EIS tax relief
  • Multiple share classes (ordinary, preferential etc.)
  • Drag along, Tag along and co-sale rights
  • Investor consent rights
  • Appointment of Investor directors and observers to the board
  • Leaver provisions alongside founder vesting schedules
  • Warranties

Only raise a Bootstrap round if you’re raising from friends and family

When SeedLegals began, we only had the seed round. There was no “bootstrap” round product. This is because our belief was (and still is) that you should start as you mean to go on by setting up your articles and your shareholders’ agreement properly and have proper deal terms in place, so that you are well placed heading into your next funding round.

However, there was a small portion of our customer base who were approaching us to help them close rounds where their uncle or their rich friends wanted to chuck them some money and no one involved cared too much about the deal documentation, all they wanted was something concrete in place to facilitate the transaction. These were small rounds of roughly £20k-£50k and the customer was confident that after these investors received their share certificates, that would be the last they heard from them.

In response we created the bootstrap product to fill that need. It was supposed to be quick and easy but really should only stand as an interim agreement before a company closes their first ‘proper’ round with external investors.

What’s Included in the Bootstrap Product?

In summary, with our bootstrap round product you can:

  • Give out SEIS
  • Subject founder shares to a vesting schedule
  • State where the investors should send their money
  • Set out the order of the transaction in the investment agreement
  • Undertake that the funds will be used for the promotion of the business

It is the most lightweight document on the market that is still fit-for-purpose for accepting investment, but does not include many terms that are typical to venture capital deals.

The bootstrap round is only for rounds where your investors are either your friends, or family members. If you have any external/professional investors, you should choose the seed round package.

If you are unsure which round is right for you, please get in touch with us on our live chat and we can jump on a call with you to understand what product suits your needs best.

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