We have a number of criteria that all companies must satisfy if they want to raise with us. These include the following:
The company is incorporated in the United Kingdom or Republic of Ireland
The company is the top or parent company
The investee company must be where the economic activity (know-how, intellectual property, capital) lies, and where other investors are investing. This is almost always the top or parent company in the corporate structure.
The company is raising equity investment
We can also work with convertible loan notes and advanced subscription agreements, but not with non-convertible debt (such as bonds).
The minimum target of the round is at least £150,000
The “minimum target” is the least amount the company is looking to raise in this round in order to fulfil its core objectives as evidenced in its business plan and financials. Most companies work with a minimum target and a funding cap (also called overfunding limit) in any given round; other companies only have one target, in which case that one target would constitute the minimum target.
Both the minimum target and the overfunding limit must be set at the beginning of the fundraise.
The company has secured commitment(s) for at least 40% of its minimum target for the round. We call this the lead investment
By “commitment” we mean firm commitment: the written or verbal assurance of an investor to invest a certain amount. At this stage, we would expect the key terms of the round, such as the company’s pre-money valuation, to have been agreed, whether formally or informally. We do not necessarily need to see a term sheet or letter of intent, although in some cases, particularly if an institutional investor is leading the round, it will be difficult to move forward until a term sheet has been signed. Ultimately, the company needs to be comfortable that the commitments indicated to us at the beginning of the process will materialise by the closure of the round, since transfer of funds from our investors is conditional upon proof that the lead investment has been received.
Investment received in previous rounds does not count towards the lead investment.
The lead investment must be representative of what our investors are to receive, whether that’s equity, a convertible loan note, or an advanced subscription agreement. Non-dilutive sources of funding, such as grants, bank loans, tax credits, etc., may count toward the funding target but cannot count towards the 40% lead investment.
The lead investment can be closed before, during, or after the SyndicateRoom listing, but note that it cannot have been transferred into the company’s bank account more than 6 months ago, and that transfer of funds from our investors is conditional upon proof that the lead investment has been received.
The funding gap is at least £100,000
Our investors must be given the opportunity to invest at least £100,000. The gap is relative to the funding cap/overfunding limit, not the minimum target.
The company has a suitable lead investor
Parity of economic terms
Our investors must receive the same (or better) economic terms as the lead investment, including with respect to the share price, share class, and level of (S)EIS tax relief.
Our investors do not have to receive the same non-economic terms, for example, board representation.
We also make sure that our investors receive certain core investor protections: drag and tag along rights, pro-rata voting rights and pre-emption rights.
The company is in a comfortable cash position
If successful, the whole process from start to finish, from due diligence to money in the company’s bank account, typically takes around three to four months. The company must have enough cash readily available to sustain operations for that period of time.