Knowledge Base: Guide to Completing a Funding Round

Important Notes:

• You can edit any details before starting the funding round.
• You can enter all funding round information, download the term sheet, and invite investors before needing to make a payment.

Jump to needed section here:

• Step 1. Define the Round
• Step 2. Invite Investors
• Step 3. Signing
• Step 4. Receiving
• FAQ's

Please note that each step also has a targeted video walkthrough for your convenience.

Step 1. Define the Round

1. Fill in Round Details:

• Begin by completing the required information for your funding round. This includes details such as the amount you are seeking and the valuation of your company.
• Some sections may need further input later in the process, so be mindful of any placeholders or incomplete areas.

2. Disclosures and Legal Documents:

• Disclosures will be generated just before closing the round to ensure they reflect the most current information and avoid becoming stale.

• Once you finalize this section, relevant legal documents will be automatically produced, including agreements and disclosures.

• All documents will be added to the Intelligent Data Room (IDR) for your review and to ensure they are accurate and complete.

   Note: At this point you will see documents in your IDR listed as 0% signed, they will not be ready for signature until you lock the round.
  
   Note: The minimum ticket mentioned in the paperwork is just advisory, it's not legally binding.
  

3. Boost Feature and Document Upload:

• At this stage, consider setting up the Boost Feature if it aligns with your strategy to attract more investors.
• This is also a great opportunity to upload key documents, such as your pitch deck, financial projections, and business plans, to the IDR, providing investors with the necessary context and information about your business.

Step 2. Invite Investors

1. Input Investor Details:

Gather and enter the following information for each potential investor:

• Full Name: Ensure accuracy for personalized communication.
• Email Address: Confirm validity to avoid delivery issues.
• Intended Investment Amount/Number of Shares: Specify how much each investor intends to contribute.
• Type of Shares: Indicate whether they are common or preferred shares.
• SEIS or EIS Classification: Include whether they are investing under the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS), as this affects tax benefits for the investor.

2. Investor Categories:

When adding investors, choose from the following categories:

• Existing Shareholders
• New Investors
• New Investing Companies

3. Send Invitations:

After entering all details, send invitation emails to potential investors.

Step 3. Signing

1. Track Progress:

• Use the platform to monitor the onboarding progress of invited investors. This includes tracking who has signed up, as well as their status regarding essential documents like the Non-Disclosure Agreement (NDA) and term sheet.
• Regularly check this section to identify any follow-ups needed with investors who have not yet completed their onboarding.

2. Lock the Round:

• You can make changes to Steps 1 and 2 up until you decide to lock the funding round for signing. Be thorough in your review to ensure everything is accurate.
• Note: You cannot lock the round until all invited investors have accepted their invitations and completed their onboarding process.

3. Finalize Signing:

Once all investors are onboarded and you’re satisfied with the details, lock the round for final signing. This step secures your terms and prepares for the next phase.

Step 4. Receiving

1. Confirm Investments:

After the investors have committed, mark each investment as received once you confirm the transfer of funds. This action triggers the platform to issue share certificates to each investor, formalizing their ownership.

2. Close the Round:

After marking all funds as received, the funding round will be officially closed. Ensure that all final checks are completed to avoid any discrepancies.

3. Download Documentation:

Once the round is closed, you can download a zip file containing all signed documentation, including share certificates, agreements, and any other pertinent records for your files.

FAQ's

I’ve had a prospective investor ask if I want to send over an NDA and I don’t know if I should…?

Now, a theory here is that there should be a level of trust between you and your investors, such that an NDA isn't necessary. In this case, a founder would share their pitch deck, forecasts, business canvas and growth plan but never any proprietary information which relates to the company.

However, an NDA provides cover should anything go sideways in the negotiation process.

 1.⁠ ⁠Sometimes, i.e. if you are disclosing patented / patentable information, an NDA is a must;

 2.⁠ ⁠⁠Your pitch deck and forecast should be benign enough to share without an NDA;

 3.⁠ ⁠⁠BUT at some point during Due Diligence you’ll be potentially sharing commercially sensitive information or information covered by GDPR. In which; case an NDA is a must.

 4.⁠ ⁠⁠Once an investor signs the FC SSA, they are bound by a Confidentiality clause in that document BUT you will have lots of potential conversations with could-be investors that don’t lead to investment, so you need to cover this eventuality (via an NDA).

Trust goes both ways - your investors won’t automatically trust you (hence investment agreements are 40 pages), there’s no reason you should automatically trust someone you just meet who may or may not end up investing.

If an investor doesn’t transfer the funds after I’ve locked the round. What happens?

We’ve built protection into the SSA so you can force the process through and don’t issue them shares…

See 3.2 in the SSA:

If an Investor signs this agreement and fails to transfer some or all of the subscription monies required at Completion within 10 days from and including Completion then, at the discretion of the Board, the Investor will not be allotted any Shares, will not be entered in the Company's register of members as the holder of them and will be not be a party to this agreement except to the extent they had rights as a Shareholder before Completion. Any subscription monies received after this 10 day period will be refunded to the Investor within a period of 10 days.

Why do my documents say 'TBC'?

Your documents will have TBC in place of certain details (i.e. dates, Chairperson in the board minutes, etc.); this is because before you lock your round for final signatures you are technically still in the negotiating phase - meaning there may be further changes made to documents.

Once you lock the round the documents will be finalised - dates added and Founders name added as Chairperson on the board minutes, this ensures that the documents to be signed are the most up to date version.

How can I add an investor to a funding round that is already in the signing process?

If you want to add an investor after signing has begun, you have two options:

1. Cancel and Restart: Cancel the current signing process, add the new investor, and restart the signing process with all parties.

2. Agile Funding Round: Complete the current funding round and then open a new agile funding round to include the additional investor.

What is the process for extending the date on our funding round?

To extend the date, you’ll need to open a new agile round by undertaking an agile authorisation. This involves entering the new details of the intended round and closing the current agile round. You can close the current round by selecting the "Close Round" option at the bottom right of the screen and then navigating to the funding round page to set up the new round.

Can we amend the timeline of the current round without starting a new one?

Unfortunately, no. All shareholders, including both previous and new investors, must be consulted to approve any changes. Extending the timeline without starting a new round would not be legally sound as it excludes input from new shareholders.

Is it possible to renumber share certificates on the cap table page?

Share certificates are automatically numbered in sequence and cannot be manually reordered. If you need to start numbering from a specific point, you can reset the next share number to 1 by visiting FounderCatalyst. However, the certificates will still be auto-numbered as issued, and there’s no option to manually specify the order.

What can I do if I need certificates in a specific order?

If you require a specific numbering order (e.g., founders as #1 and #2), you may need to generate the certificates outside of the system, especially if the shares were issued outside of a round managed within FounderCatalyst.

How long do prospective investors have to transfer funds after signing the term sheet?

This is not defined legally and depends entirely on the agreement between you and the investor. You may wish to set and communicate a mutually agreed timeline directly with them.