Venture capital funding rounds can be more complicated compared to seed and early series rounds. This is Part 2 of our guidance on the basics to consider.
In a conversation recently, an experienced private equity lawyer told me “Mike, you must have teeth as well as balls!” I liked her metaphor and it was a good reminder when thinking about taking shares as fees in a company you’re working for. In the end I took the equity: but that’s another story (and what makes Who Needs Law a little different!)
It got me thinking more generally about company equity, in this series of blogs I’ll try to cover some equity topics that high-growth companies may encounter, starting with equity incentive structures.
SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) make investing in your business more attractive to potential investors. Why? Because investors can claim tax relief on the shares they purchase. Following are the respective benefits for investors:
At some point your startup will move out of the startup phase and you’ll find yourself ready to begin the scale up process that will transition you into a bigger business. And that’s a process that raises a lot of questions. What changes come into place when you go from a team of 5 to a business of 90 (or more)? And how do you simultaneously grow while staying true to the roots that set your startup apart in the first place?
First, some background for those who don’t yet know what the SEIS is. The Seed Enterprise Investment Scheme (SEIS) is a government initiative that offers up some of the most attractive tax breaks available in the UK to equity investors. In order to access them, one needs to invest in the shares of a small, unlisted company – “small” in this case meaning 250 employees or less, and with maximum gross assets of £15 million. In some cases it’s even possible to invest with SEIS in listed companies, but only those listed on small exchanges like AIM or ISDX. You can watch a great video on it here.
When starting a new business, we know that there are a million and one things on the to-do list. But one that should be much higher up your list than it probably is should be dealing with legal documents. Although for most companies this act is more on the dreary side, it’s an important aspect of getting your startup up and running smoothly. While other tasks on your list may be more exciting, getting your paperwork in order will be the best way to protect your investments and start off on the right foot. Having the correct agreements in place as early as possible is crucial.
But where to start? We’ve put together a shortlist of 6 key legal documents that your startup will need.
When it comes to getting a startup off and running, identifying and protecting the intangible assets and other intellectual property (IP) that set you apart from the crowd is just good business.