We only list deals that have ‘lead investment’. This means companies with a significant amount of their funding round already negotiated and committed. We then offer our investors the same share class and share price, and ensure our required additional protections are in place (drag along and tag along, pre-emption and pro-rata voting rights). This way our investors’ interests are aligned with the ‘lead investment’.
- Each company must have a minimum of 40% of their round already in place as ‘lead investment’. This doesn’t have to come from one source; it could be from a syndicate of angels. For example, if a company is raising £1m, they need to have already raised at least £250,000 before being considered for listing on SyndicateRoom
It is likely that most or all of these investors are at arm’s-length, or fully independent, from the company. In other words, they’re investing in the company for the first time and not otherwise connected to the business in some way (e.g. as a commercial supplier). The incentives behind their investment decision are therefore closely aligned with those of SyndicateRoom investors.
In some cases, a larger proportion of the lead investment is in some way connected to the company and not at arm’s length from it. However, we do then distinguish between different types of connectedness (e.g. existing shareholders “following their money” by taking up their pre-emption rights on existing investments versus investments from family or friends). We always establish the nature of an investor’s connection to the company in detail to ensure the quality of the opportunity has been appropriately validated; this goes to the heart of our “investor led” model.
See also: Who is a lead investor?