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 25% 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 25% lead investment.
Depending on the nature of the lead investment, we may require more than 25% to be committed. This happens in cases where the majority of the lead investment is from sources closely connected to the company - e.g. friends, family, company advisors, and existing shareholders.
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. Click here for more information concerning a company’s legal documents.
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 - click here for further details on our process. The company must have enough cash readily available to sustain operations for that period of time.