The VC Series: a guide for raising funds from VCs

‘The VC Series’ is a series of articles aimed at founders who are thinking of raising funds from VCs

At Michelmores, our award-winning VC and scale-up team regularly supports founders, companies, angel investors, VCs and corporate VCs on a variety of venture capital fundraising transactions.

This VC practice is supported by and complements, MAINstream, our UKBAA registered angel investor network, and MiVentures, our support program for high-growth early-stage companies.

From this experience of working with ambitious entrepreneurs who are trying to take their business to the next level, we know that founders find the fundraising process a stressful and daunting prospect.

A key part of our role is therefore to help make the process as painless as possible – this involves ensuring that founders know what’s coming and what will be required of them; demystifying some of the terms that are regularly used; making sure that they are picking their fights wisely and not expending negotiating capital on unimportant items; and ultimately giving them confidence that they have achieved a fair outcome with their investors, most of whom are likely to have far more experience of negotiating these terms than them.

Therefore, to try and give founders a head start, we have released a series of articles that explain and demystify some of the key elements involved in the process of raising funds from VCs.

These articles cover everything from the early stages of the process, when the focus is on negotiating the Term Sheet and responding to due diligence enquiries, through to the negotiation of the investment documentation, where we explain some of the key terms that VCs are likely to require.

It is important to flag that these articles are of course high-level introductions only and, if you are a founder who is raising funds, it is important that you get the benefit of specialist legal advice to ensure that you get the best result possible.

We would of course be very happy to discuss with you how we may be able to support you in achieving this, so if you think we might be able to help then please get in touch: scaleup@michelmores.com.

1. Term Sheets
2. Due Diligence
3. Completion and Tranched Investments
4. Warranties and Disclosure
5. Investor Consent Items and Information Rights
6. Restrictive Covenants
7. Preference Shares
8. Liquidation Preferences
9. Anti-Dilution
10. Board of Directors and Board Meetings
11. Founder Vesting
12. Leaver Provisions
13. Share Transfers – Right of First Refusal, Co-Sale and Tag Along
14. Drag Along