Knowledge Base: Agile Funding Rounds

What is Agile?

An Agile round enables you to use the money you raise as it comes in, as opposed to waiting to get all of your investors lined up at one point. This way, you can keep raising funds even after the round has closed, without the hassle of excessive paperwork. This approach, known as a ‘rolling close’, is a flexible fundraising structure that isn't constrained by a fixed amount, enabling continuous investments. Following the initial investment closing, new investors can join the same round under the same terms, typically within a 6-month period, though this timeframe is flexible.

In order to start an agile round, you first must authorise the creation of additional new shares. This allows you to add investors and close each investment at different stages. You do not have to ask for permission from existing investors to raise further. They’ve already waived pre-emption rights and given investor consents. You can do this when defining your Initial Funding Round. Alternatively, if you’ve already completed your initial round, you can select ‘Authorise an Agile Funding Round’.

Two methods to set up an Agile round

1a. Authorising agile shares when defining your initial funding round. Jump to 1a

1b. Using your existing documentation and authorising an agile round Jump to 1b

The two methods are shown below including video walkthroughs.

Section 2 shows you the steps once you've started your agile round (including closing investors). Jump to Section 2

1a. Authorising agile shares when defining your initial funding round

When defining your initial funding round, enter your desired number of agile shares to offer, the minimum price per agile share, and your agile share deadline. This will authorise agile shares for your startup - but you don’t need to pay yet.

From here go to Section 2 to see how to complete and close your Agile Round.

1b. Using your existing documentation and authorising an agile round

Check out this video to learn more.

1. Select this option if you need to increase the number of shares/deadline for an Agile round raise.

2. From the below options, input your number of agile shares, minimum price per agile share and the agile share deadline (up to a year).

3. At the next stage, you must get your current shareholders to approve the creation of an agile round (don’t worry – we’ll do that for you!), unless you have indicated that you've already undertaken this step outside of the FounderCatalyst platform. In order to proceed you need:

3a. Holders of at least 75% of the shares in your company to approve the Special Resolution.

3b. Consent from holders of over 50% of the investor shares in your company in order to finalise this investment.

2. Starting an Agile Round and Closing Investors

If you have completed the steps above, you are now ready to start an agile round.

1. Select "Start your Agile Round"

2. Next up, begin to invite your investors. You can choose from the options in blue.

3. Ensure you complete the fields shown in the photo attached.

4. Once you have invited this person to the platform, they will need to sign the required documents. You can send them an email requesting they sign, by clicking ‘Chase Outstanding Signatures’.

5. Once the documents have been signed, a green signature will appear below each of the documents. Once the money has been transferred, click ‘Mark as Received’. Enter your password as instructed.

6. Following the transfer of money, you can close the round.

FAQ’s

Why is Agile so attractive for founders?

• Agile has a number of use cases, but typically an Agile round is attractive because of the immediate intake of cash. Raising via an Agile round enables the founder to get the money in the bank without any delay. From there, you can start spending it to build traction and then raise further agile investment as and when you need it.

• Another example of how Agile could be utilised is if one of your first investors negotiated your valuation down, and you now have ample interest at your initial valuation. Getting other investors into the same round at a higher valuation is often challenging, for obvious reasons. In this case, you can close your initial funding round, and open an Agile round immediately - allowing you to move your share price up and down at your will, as long as you are above the authorised minimum.

How are existing investors protected?

• The share price during an agile round is set at a minimum value – this is usually set at a value no lower than that of the previous funding round. This guarantees that the agile shares won't be sold at a lower price than what investors previously paid.

• The number of shares that can be offered is capped, ensuring investors are not diluted beyond a specified percentage in the agile round.

• The timescale for the agile round is defined, preventing the founder from raising funds at the same price for an extended period, such as two years later, when the share price should have increased significantly.

What do I need to start an Agile round?

In order to start an agile round you need initial documents (Shareholders agreement and Articles etc) in place. If you have completed an initial funding round with FounderCatalyst, these will already be produced or you can use your previous documents not produced by FounderCatalyst.

Do I need a new Subscription and Shareholders Agreement?

You don't have a new SSA in agile funding rounds. The very thing that makes them agile is the use of an adherence agreement.

Can I use the Agile function if I have existing non-FC paperwork?

Yes! You can authorise (taking care of any consents and the shareholder resolution process) and undertake an agile funding round on FC but using your existing paperwork. Our adherence agreement just 'attaches' investors to the existing paperwork.

When are shares issued in an Agile round?

Shares are issued the moment you mark the money as received on a per investment basis, you don’t need to close the funding round to close each investor or receive the cash from investors.

Who will generate shares in Companies House?

You will once the shares are sold, by filing an SH01 according to this article.

Can I invite ‘Entry-Level’ investors to my Agile round?

Agile rounds can't have "entry level investors" (normal investors in funding rounds with an uncommitted number of shares). Just set the investor to have any number of shares, even if they haven’t committed to anything yet, and they will be invited to your Intelligent Data Room.

Does the second round have to raise the same amount of funds as the first and at the same value?

No, the share price can increase over time and you can raise very different amounts – it really is agile.

How long can the agile funding round take place after the first round has closed?

Up to one year.

Extending your Agile Authorisation

Unfortunately, the authority we seek at the start of the process only authorises shares to be issued up until the date set. To extend beyond that you can go through the authorise -> agile round cycle again to keep raising over future months.

Payment Queries

• The fee for an Agile round is £995 ex vat.

• When setting up a normal priced round, you can state that you want to offer agile shares at a later date. This does not lock you in to anything, as you don't need to pay for your Agile round until you use it.

What happens if I don't close a full Agile round? Remember, you're not issuing shares - you are authorising to allot new shares so if you don't issue them there is no impact.

What do we do if we need to change a right/protection?

You have to start a priced round to get around that as you can’t change rights/protections during an agile round.

ASA vs Agile?

With ASAs a founder has to issue new ASAs for each investor - they need to authorise each one, issue each one and understand the conversion trigger for each one.

Whereas Agile is set up at the outset and investors sign an Adherence Agreement, it's very simple.

Agile benefits the investor as they get equity the moment they put money into the business, so they can reclaim SEIS and the whole process works much faster; with ASA, as an investor, you can only claim after the month long stop date has passed.

What admin do I need to do once I receive investment from an investor in an Agile round?

You are required to notify Companies House regarding the allotment of new shares via an SH01 - see our guidance on how to complete and file an SH01. If these shares are made using the SEIS or EIS schemes, then you also need to notify HMRC via a process known as Compliance and Certificates – we will do this for you – FounderCatalyst support for SEIS & EIS compliance

Which document usually indicates if we need investor consent for a new round?

The shareholders agreement, subscription agreement or whatever you previous took investment under almost always enshrines consent rights (or not).

Do I need to include all of our existing shareholders before starting an agile round?

Yes, those are the people you need to ask for consent (or to approve the shareholder resolution at least) so when you decide to go for this, we should ensure your existing captable is invited.

On the platform, how can I apply a discount for a specific investor in agile investment?

In an agile round, your 'floor' on a share price is the amount you authorise. You should ensure that your floor is low enough to accommodate any discount you wish to offer. You can vary the share price over time in an agile round, but never below the floor.

Just to clarify, if at any point I need to close the round before the shares are issued according to the agreement, or if the valuation increases, or if a VC wants to propose their own terms, I can proceed with that. Is that right?

Yes - you can close an agile round at any point you wish. You don't need to close an agile round when your share price increases, you can simply put a higher price in the offers.

By doing an agile round, does this mean I have to submit a SH01 every time someone invests to HMRC or is there a method in doing it after everyone has invested?

Your obligation is to submit an SH01 within a month of allotting shares, so most people 'batch' the submission of SH01s to catchup on filings that occurred in the last month rather than doing one SH01 per allotment.

Will an agile funding round dilute existing investors?

Yes, an agile funding round dilutes everyone, including founders and existing investors, in the same way as adding an additional investment as part of the original funding round.