Going in blind.

Week 7: Investing for Dummies 101

We might as well call this segment investing for dummies 101, because that is quite literally how I feel when approaching the next daunting chapter of my venture’s growth.

I have had very limited prior understanding of what raising funds for a business entails. But it’s something that as a founder, I can’t put off. And the good news is - there are a lot of free, accessible resources out there for people like us. You don’t need to already be in the room to start learning how the room works.

These past couple of weeks, I’ve been deep in research mode, educating myself on everything I’d need to know before I sit across from an investor. And I’m breaking it all down for you.

What is your company's valuation?

There are many different types of funding, but the one I’m going to highlight is called Equity Solutions which covers everything from Family & Friends rounds, Angel investment, and VC raises.

Here’s a rough idea of what valuations look like at each stage:

Family & Friends round — valuations typically sit between £250K and £1M.

Note: The figure you’ll hear most often is around £750K, which is right in the middle of that window. At this stage, most founders give away somewhere between 5% and 20% equity. Whatever number you set here matters as it sets the tone for every round that follows.

Pre-seed / Seed round — start around £750K–£1.5M, but the UK market for example, has been moving closer towards 2.4M (2024).

Note: First-time founders typically raise between £100K–£500K at this stage; more experienced founders with something to show can raise £500K–£2M or more.

These numbers matter because your valuation determines how much of your company % you’re giving away in exchange for investment. Understanding this before you walk into any conversation is non-negotiable.

I know what you’re thinking — but how do you actually come up with the number? (Because I also had no idea).

One simple way to work backwards is this equation: if you’re raising £500K and offering 20% equity, your company is valued at £2.5M. That’s your number. Now you just have to be able to defend it.

For pre-revenue startups, a method called the Berkus Method breaks your valuation down across five things: your idea, your prototype, your team, your relationships, and your early traction. No revenue required, just evidence that you’ve thought it through.

So, your company is basically worth what you and your investor agree it’s worth. People invest in what they understand. Not just what sounds good but what they can genuinely see the potential in. So the more clearly you can communicate your vision to the right people, the better.

You’re not ready to start without these

When you go to raise there’s a few things you need to have in place in order to formally raise. Yes, your company needs to be incorporated, and you need to have set up a separate business bank account to receive the money into. And you probably already knew you’d need to have a pitch deck ready - I mean I knew that too. But there’s also a few other priority items.

• A financial forecast model

• A term sheet

• An evaluation justification (you need to be able to explain why your company is worth what you say it is)

• Tax Relief Scheme

Regarding that last one, as I am raising in the UK, I want to benefit from a tax relief scheme in my funding round of either SEIS + EIS ( the one you choose depends on the amount you are looking to raise). If you’re raising in other countries, some similar benefits to look into are CITC (Canada) or the USA (QSBS) to see what your options are.

Put simply, investing in an early-stage startup is risky so highlighting a government-backed tax benefit to your investors is definitely an incentive that will help you raise.

3 structures of funding (UK Edition)

This was another bit of VERY valuable information I got from the Female Founders Rise Webinar. There are a few different ways to structure a funding round, and the method you choose matters.

1. Advance Subscription Agreement (ASA)

The investor signs a document committing a specific amount for shares up to a set date or “trigger event”. You don’t actually issue shares until around six months later (this applies to the SEIS/EIS tax-relief benefit), at which point their investment converts to equity. It’s a softer entry point for early investors. ASA investors also typically receive shares at a discount compared to investors in the main funding round, as a reward for the early-stage risk they took.

2. Priced Round

Everyone invests and signs documents at the same time. This is typically used for larger raises, but the catch is you can’t close until majority investors are onboard and aligned (say about 70%). You can have an top up round if you choose to raise more which is called an “instant investment”.

3. Agile Round

You close a small initial round and continue raising over time. As more investors come in, the share price can increase and you can top up with additional investments at the same or higher valuation, with no further investor consents needed. It’s called a “rolling close” because you’re not waiting for everyone to be ready at once, you keep the door open and keep building. For an early-stage founder, this feels like the most human and flexible option.

Investor Tips

Angels invest in founders.

Founder-first companies are ones that have built a real community from the beginning and can ultimately have a higher chance of being backed. The person matters as much as the idea. So, selling yourself and building your personal brand story can be a super favourable step.

Another HSR investment tip:
“Give advisory shares to VCs at companies that you want to be like. Get them on your cap table early. It signals credibility and builds relationships with people who are genuinely invested in your success.”

A Final Note

A lot of what I’ve shared this week came from a free webinar run by FFR, an accelerator programme I’m interested in signing up to that just happened to host a free session to non-members.

And that’s kinda the whole point, there are opportunities everywhere. You don’t need to be in a course or accelerator before you start learning. The resources are out there from newsletters, webinars, communities, podcasts, free webinars, etc.

Keep your eyes open and jump on the opportunity when something lands in your inbox.

xx KP