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Funding Rounds: deciphering the documentation

Written by
Sam Simpson
Last updated
11th January 2023

Introduction

Going through a funding round can be an exciting, but overwhelming, process. And that’s not helped by the amount of paperwork that’s involved. We often get asked by founders about which documents we produce and what each of them does during a funding round. So, if you’ve ever wondered that too, here we explain them all.

We’ll start by looking at the list of exhaustive documentation we produce to support founders in their first funding round. Then we’ll walk you through the documents used in each of the other round types offered on FounderCatalyst.

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Contents:

  1. Onboarding Investors
  2. The Key Documents
  3. Supporting Documents
  4. Post Investment
  5. Other Round Types

Onboarding Investors

We have three documents that are used to ‘onboard’ investors. By onboard, we mean: to ensure that you are covering your legal bases and not exposing yourself or the company to unnecessary risk.

The Key Documents

The following documents are the most likely to be scrutinised and negotiated by potential investors. Hopefully the significant items will already have been settled during any negotiation of the term sheet.

Supporting Documents

These documents authorise the allotment of new shares, adoption of the new articles of association (as applicable) and similar items:

Post Round

Finally, the round closes and we produce one final document type:

Post Investment

Don’t forget, there are also additional post-completion formalities founder(s) need to undertake.

Other Round Types

When you undertake a first funding round on FounderCatalyst, we issue all the documents detailed previously in this article. This ensures that all legal elements investors will expect to see are present and correct.

When you go on to undertake further funding rounds, you have a number of options as detailed below.

In any event, we onboard potential investors in the same way (NDA, FCA Investor Certificate and Term Sheet). We'll always issue share certificates, too.

In two out of three cases it will be necessary to seek board and shareholder approval and, if appropriate, investor consents and we'll manage those for you too.

Same Terms

You've already got a full set of documentation, so if investors are to join your Cap Table on the same terms then this is the right option.

Investors get onboarded as normal, but the only documents to be used within the round are:

New Terms

This round type allows you to change the terms offered to your investors. It’s worth remembering that these changes will also impact existing investors, of course.

In this type of round, we don't replace your Founder Service Agreement(s) or IP Assignment(s), but we do produce new Articles and a new SSA. An updated disclosure letter will be produced, too.

Agile Round

This is also known as a 'rolling close' or 'additional new share' (ANS) round. To enable an agile round, you will need to specify this in either the initial funding round or New Terms round. This paperwork will authorise you to issue a certain number of shares, over a certain period, at a prescribed minimum price per share. For example, you might be authorised to issue up to 10,000 shares at a minimum share price of £10.80 per share for a period of 1 year, for a total further raise of up to £108,000.

An agile round allows you to continually add investment over a period, without having to undertake a full formal funding round. Your existing shareholders / investors approve your agile round when signing up to previous the previous SSA, which means the usual time-consuming hurdles (investor consents, shareholder resolutions and the pre-emption process) are all unnecessary.

An agile round consists simply of Board Minutes, and an Adherence Agreement signed by the investor alone for each investment.

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