Knowledge Base: FounderCatalyst & Fuel Ventures: Funding Round Process

Introduction

This document outlines the collaborative process between FounderCatalyst Ltd (“FounderCatalyst”) and Fuel Ventures Ltd (“Fuel Ventures”) for efficiently closing a funding round. The aim is to streamline communication and ensure a smooth execution from term sheet production to funds received.

Founders should use this document as a play book for how to manage a funding round involving Fuel Ventures on the FounderCatalyst platform. As always, if you have any questions or suggestions for improvements, then please message info@foundercatalyst.com or drop the team a support ticket

Overview

This process is in 3 steps:

1. Invite Fuel Ventures and agree the Term Sheet.

2. Invite MNL Nominees Limited to formalise and close the funding round.

3. Post-close obligations.

We walk through each of these in the following sections.

Why use FounderCatalyst to close your Fuel Ventures funding round?

FounderCatalyst was built by founders, for founders. Our mission is to remove key barriers in the UK startup ecosystem - particularly the high legal costs of funding rounds and the lack of meaningful support.

We offer a simple and transparent fee structure: each funding round costs just £1,495 + VAT, no matter how much you raise. For example, one of our clients secured £2.8m through FounderCatalyst and still only paid £1,495 + VAT - around a tenth of what other providers would charge.

Our TrustPilot score - the best for any UK based funding platform - speaks volumes about our service. But what makes us different is our team. The FounderCatalyst founding team is made up of exited founders and active angel investors, bringing real-world experience to the table. Among us are a practising solicitor, a chartered accountant, an exited founder who grew a business from £0 to £30m revenue in four years, and seasoned angel investors. This means you’ll be supported by people who have built, scaled, exited, and invested in startups themselves - not by a junior associate with a checklist.

Phase 1: Invite Fuel Ventures to negotiate and sign the Term Sheet

At this point, we assume you have an ‘offer in principle’ from Fuel Ventures, subject to legals and due diligence. One of the key actions towards closure of any investment for Fuel Ventures is to agree the Term Sheet (for more about the Term Sheet - see the FAQ below).

If you haven’t done so already, you should setup on FounderCatalyst (don’t worry, you can undertake this stage for free):

• Head to the FounderCatalyst website and create an account.

• Add your company as directed.

• Enter your details and those of any co-founders.

• Enter the details of your current shareholding (your CapTable). If you have any pending information heading to Companies House (e.g. you are undertaking a share split or need to add shareholdings to reflect reality), enter the CapTable as it will be required once these filings have occurred.

• Now create a specific share class for Fuel Ventures to use - head to the company section and click Add Share Class. Enter the name as “A Ordinary” and leave the other details as they are - click Add Share Class again.

• Click on the funding rounds menu on the left.

• Start a “Full initial funding round”.

• The first item in Step 1 asks “Do you want to generate paperwork for a specific investor?”. You should select Fuel Ventures from this list. This will:

  • Lock certain settings on the platform to align with Fuel Venture requirements.

  • Make specific Fuel Venture amends to the Subscription and Shareholders’ agreement and Articles of association.

• Enter all of the details in Funding Round Step 1. You will need to pass over Specific Disclosures for now.

• Finally, once you've fully completed Step 1 of the funding round process, it should enable access to Step 2, "Invited".

• You should now invite:

  • Fuel Ventures to this funding round with the relevant amount(s). This should be done via the “A new company that will own shares” button. Please enter the contact name you are working with within Fuel Ventures at their email address and Fuel Ventures Ltd.

  • A further Fuel Ventures invite using the same details, but for £500 with no scheme (ie no (S)EIS). This is an investment being made by Mark Pearson personally.

  • Any other investors that you’ve agreed with Fuel Ventures.

  • Note: If any of your investors have both SEIS and EIS investment in this funding round then invite them twice - one marked as SEIS and the other for the EIS allocation.

• Don’t forget to click the “Send invitation emails” button

Your representative from Fuel Ventures will then onboard and undertake a review. If all ok, they will sign the term sheet. You should download and save a copy of this locally as it will be deleted soon - more on that in the next section.

Phase 2: Closing Procedure

We assume you’ve undertaken Phase 1 and your Fuel Ventures contact has signed the Term Sheet and asked you to progress - great stuff and congratulations…the next phase is simple.

First, we need to clean up the CapTable: Fuel Ventures won’t actually be the investor for the purpose of the funding round itself - they use a company called MNL Nominees Limited to ensure full compliance with FCA regulations.

To actually close the funding round we need to remove Fuel Ventures from the platform, invite MNL Nominees Limited and then close the deal, all covered in the next sections.

• First step: Clear up! Make sure you’ve downloaded copies of the Fuel Term sheets, then head to Step 2 and remove all of the Fuel Ventures entries by clicking the little trash can icon next to each Fuel Ventures entry.

• Again, from Step 2 you now need to add identical investment invites to the platform, but this time swapping Fuel Ventures for MNL Nominees Limited as the investor company. This time you should use “An SPV/nominee that will own shares in your company”. If you had 3x investment lines in Phase 1 (1x SEIS line, 1x EIS line, 1x Mark Pearson £500) then you need to enter three entries for MNL Nominees Limited here too with the same details as before (shares, investment amount, scheme and share class).

• Don’t forget to click the “Send invitation emails” button.

• Now raise a support ticket - we know what company this relates to, so simply tell us ‘Please move MNL Nominees Limited to an offline signer for my company’. The team will then do so.

• You should then download a copy of the Subscription and Shareholder Agreement, Articles and Disclosure letter and email these to your contact at Fuel Ventures for offline signing by MNL Nominees Limited.

• IMPORTANT: If you are closing a ‘dual round’ involving both SEIS and EIS in the same round, then you need to be careful and should consider the process detailed at before passing this point in the process; see our guide on managing a dual round

• When confirmed as ok by Fuel Ventures, and everyone is onboarded you should head to Step 3 of the funding round and Lock the Documents for signing.Again, alert your contact at Fuel Ventures that you have done so.

• Confirm to Fuel Ventures when everyone else has signed in the funding round and you reach Step 4 (Receiving).

• Fuel Ventures will then obtain signatures from MNL Nominees Limited and provide these in PDF format to you.

• You should continue to receive the money as normal (when you get payments from investors, you mark as received on step 4 on the same day you get the money).

• Finally, the round is closed - bravo!

• You should now download a complete copy of the round ‘completion bible’ and email a copy to your Fuel Ventures contact.

Congratulations - you have closed a funding round in conjunction with FounderCatalyst and Fuel Ventures 🎉

Phase 3: Post-completion obligations

The fun doesn’t stop there - you need now need to undertake a number of post-completion obligations - we outline those in our post round formalities article

If you are using FounderCatalyst to undertake the (S)EIS compliance and certificate process, then you’ll now need to head to the Beneficial Owners section of the CapTable and enter details of each underlying investor to facilitate that process - see our guide on Special Purpose Vehicles (SPV's)

Useful Links

• All about SPVs (including MNL Nominees Limited)

• Post funding obligations

• How to undertake a ‘dual round’ involving SEIS and EIS

FAQs

What is a Term Sheet?

A term sheet is a short document – usually 4 or 5 pages - that summarises the key deal terms and is designed to be much more accessible than the formal documents of a funding round, which usually add up to more than 100 pages of dense legalese.

As such, the term sheet can be considered a commercial rather than a contractual tool, because it:

• Serves no enduring or useful legal function.

• Has (mostly) no legally binding impact.

• Doesn’t oblige an investor to invest or a Founder to accept the investment.

So, if it’s not contractual, you might ask… why does it exist? Here are three key reasons:

1. Speed and focus: Distilling 100+ pages into 4 or 5 pages speeds up negotiations and focuses attention on the ‘interesting’ stuff without being bogged down by detail.

2. Aids alignment: Aims for alignment between founder and investor(s), i.e., what company will the investment be in, how much, what valuation etc., and serves as an anchor for both parties as the process continues.

3. Signals intent: From the founder’s side, it demonstrates you are genuinely ready to take on investment and have made yourselves ‘investor ready’. From the investor’s side, signing a term sheet is a sign of commitment to a funding round. While it’s not binding, and lots can still go wrong, it’s a clear statement of intention and it would be hard for either investor or founder to go back and renegotiate something that has already been agreed in principle in the term sheet.

Back in the bad old days, you’d want to agree to all of the interesting details before you throw £10k at a lawyer to take the term sheet and turn it into Subscription and Shareholders Agreement, Articles etc. Of course, with FounderCatalyst these other documents are created at the same time as the term sheet anyway, with no additional time or cost implications.