✍️

The #DSLive Advanced Subscription Agreement (‘ASA’)

1. The #DSLive ASA Overview

The '#DSLive ASA' is a new investment structure created for the Debut Sessions ('DS'), which is innovating around the way UK pre-Seed companies raise capital and are valued. The #DSLive ASA also includes an option for angel investors, that attend #DSLive, to co-invest alongside Ascension for as little as £2,000 in the winning pitch company, opening up the ecosystem to a new generation of angel investor.

The Key #DSLive ASA Terms

  • Ascension will invest £100,000 (SEIS) into the winning startup of the #DSLive pitch competition, within 72 hours of #DSLive finishing
  • The #DSLive ASA will fix the funding round dilution at 16.66%, with a fundraise floor of £250,000 and ceiling of £1,000,000 (i.e. 6x the amount you raise = the post-money valuation)
  • The #DSLive ASA has a Long Stop date of 60 days, once the startup has received the £100,000 from Ascension, to raise the remainder of its funding round, knowing that the dilution will remain at 16.66%
  • A default 6% ESOP (Option Pool) to be added post-completion, meaning the additional dilution impact will be shared by the new investors
  • The #DSLive ASA includes a #DSLive Event Option, using Ascension’s Nominee infrastructure, to allow attendees of #DSLive to co-invest alongside Ascension in the winner of the pitch competition, for as little as £2k

"This new approach to valuing a company for its first round of funding, using a fixed funding round dilution of 16.66% (i.e. 6x the amount a company raises) that incorporates a fundraise sliding scale of £250,000 to £1,000,000, means that founders can focus on the amount they want to raise with the investors they want involved, knowing what the final outcome for dilution will look. Along with this, the company will have 60 days to explore different investor options available to them with the security that they have already received the £100,000 to £200,000 from Ascension and the (potentially) #DSLive attendees. Finally, a 6% ESOP will be introduced once the funding round has closed, meaning the new investors will share the additional dilution impact, alongside the founders."

The #DSLive ASA Key Terms Summary Sheet

Key Terms Summary

NameThe ClauseThe Explanation
Conditions to Close
Clause 2.1
2 conditions to closing the ASA must be satisfied: 1) the Company emerging as the winner of a Live Event and, 2) the Company passing Ascension’s DD checks If DD checks are successful, Ascension will notify the Company via email by 5pm UK time, 3 Business Days following the Live Event
The Valuation (‘Financing Round’)
Definition ‘Financing Round’ Clause 5.2
The Company will need to make sure that its next round is a subscription for equity in the Company by one or more persons raising an aggregate of at least £250,000 and no more than £1,000,000 (including the Advance Subscription Funds, any Optional Advance Subscription Funds, and any other convertible securities or advanced subscriptions outstanding at the date of the Financing Round) at a post-money valuation equal to six times the aggregate amount raised, which amount can be raised in one or a series of fundraising's before the Longstop Date. And if the Company wants to make or accept a funding offer on different terms, Ascension will need to approve this first.
Long Stop Date (for closing the round)
Definition ‘Long Stop Date’
The start-up will be prompted to set a Long Stop date that is 3 days + 60 days after the Live Event
Optional Advanced Subscription (for Live Event attendees to co-invest)
Clause 2.2
£125,000 reserved for the Live Event co-investors via Ascension’s Nominee structure. MNL (Ascension) Nominees Ltd is free to determine the amount of investment, provided that it is between £5,000 and £125,000 MNL can exercise the option by notifying the company of the exact amount within 7 Business Days following the Live Event
6% Option Pool post-completion
Clause 5.4
The Company will undertake that within 30 days after the conversion of the ASA, it will create an Option Pool representing 6% of the fully diluted share capital of the Company. For the avoidance of doubt, the dilution will also include the Conversion Shares (i.e. dilute the investors).
Founder Reverse Vesting (3 years, 1 year cliff)
Clause 5.3
Company will need to ensure its articles/founder agreements have been updated accordingly.
Payment
Clause 2.4
After the Conditions are satisfied, the Company will receive £100,000 within three days, and if there’s any Optional Advanced Subscription, that payment will be made within 30 days of Ascension exercising its option

2. The Ascension £100k Investment

The DS will be running at least 4 #DSLive sessions in 2021 and Ascension is fully behind supporting the initiative. This is why Ascension has committed to making a Conditional Advance Subscription of £100,000 into the winner (‘Company’) of each #DSLive (‘Live Event’).

How to Qualify

In order to qualify to pitch at a Live Event, a startup must be eligible for SEIS relief and have raised less than £50k of SEIS funds to date. The finalists will be notified at least 7 days in advance of a Live Event that they have been selected to pitch, at which point they will be asked to sign the #DSLive ASA on SeedLegals, up to 48 hours in advance of the Live Event, in order to pitch.

The winning Company of the Live Event will be announced live at the end of each Live Event and will be chosen by the 8 DS investors based on a majority vote.

The Advanced Subscription for the Company is conditional upon the satisfaction of 2 conditions: the Company emerging as the winner of a Live Event and the Company passing Ascension’s DD checks. Ascension will notify the Company via email by 5pm UK time, 3 Business Days following the Live Event if the conditions have been met. Ascension may choose to waive the condition of the Company emerging as the winner of a Live Event (i.e. in the case of another pitch finalist that it may wish to invest in as well), in which case it will also notify the Company via email by 5pm UK time, 3 Business Days following the Live Event.

How the Valuation Works

The UK market is 🔥 right now, and we only expect the quality of capital and start-ups to increase throughout 2021. Founders are getting a lot more choice in how they build their cap table during an investment round, and rightly so. We understand that Founders want to know what % of their business they will ultimately give away once the round is closed. The market standard is to offer a pre-money valuation, meaning it’s difficult to truly know what the ultimate dilution will be for founders, once the round has closed. The amount of capital being raised after the pre-money being agreed and the introduction of an Option Pool mean that the post-money valuation can vary throughout the process, leaving founders losing control on what the ultimate dilution will be, once all is said and done. This is why we’re doing something different with the #DSLive ASA...

📌

The #DSLive ASA will fix the dilution at 16.66%, with a fundraise floor of £250k and ceiling of £1m.

The #DSLive ASA will allow the Company to raise between £250k and £1m (a ‘Financing Round’), including Ascension’s £100k, where the dilution will be fixed at 16.66%, meaning that the aggregate amount raised (between this sliding scale) before the Long Stop Date, will be multiplied by 6 to give the Company a post money valuation for the Financing Round. For example:

If the Company raises £250k, then the post-money valuation will be £1.5m (£250k x 6)

If the Company raises £500k, then the post-money valuation will be £3m (£500k x 6)

If the Company raises £1m, then the post-money valuation will be £6m (£1m x 6)

If the Company raises an aggregate amount of less than £250k before the Long Stop Date, including Ascension’s £100k, then the pre-money valuation will remain at £1.25m

The Long Stop Date

Once the Company has received the Conditional Advanced Subscription of £100k from Ascension, it can go ahead and raise the remainder of its Financing Round. It will have about 60 days to raise the remainder of its round after a Live Event. This should give the Company sufficient breathing room to know that whatever it raises between £250k-£1m, the dilution will be fixed at 16.66%, and other investors coming on board will know the maximum valuation of the Company when committing.

We think this is a unique approach for an Advanced Subscription Agreement, that both allows a start-up to raise in aggregate over a 60 day period, knowing what the final dilution to their company will be, and lets investors know what the minimum and maximum valuation will be, once the Long Stop Date has been reached. We hope you agree!

Creating and signing your #DSLive ASA on SeedLegals

We have partnered with SeedLegals to enable all finalists selected to pitch at the Live Event to create and sign their #DSLive ASA. Every Live Event finalist will receive a link to SeedLegals where they can set up their profile and generate the #DSLive ASA by following a few easy steps. As a note, only the Company Ascension invests in will be obligated to pay SeedLegals a fee of 1% of the total funds raised via the #DSLive ASA (capped at £2k +VAT if the Company raises £200k).

SeedLegals standard pricing = 1% of the first £300K raised, then 0.5% between £300k to £1m, then 0.2% of anything above £1m.

3. The #DSLive Option - £125k allocation for #DSLive attendees

"Opening up the opportunity for small ticket angel investors to co-invest alongside VCs is something the ecosystem has been asking for, for years (see Pietro from Stride’s Tweet). In the UK, and Europe more generally, its common to see minimum subscription amounts of £20k imposed on funding rounds, which restricts very talented operators and engineers who have a huge amount to offer startups, but cannot afford to start at £20k tickets and are restricted to crowdfunding platforms, where they rarely get to engage with the companies they are investing in. This is why we’ve created a structure, specifically for #DSLive, to enable these individuals to co-invest alongside Ascension and institutional investors, in the winner of #DSLive, for cheques as little as £2k. We believe that the incredible value and support these operators and engineers could bring to founders starting their journey, could help define the future success of startups in our ecosystem."

The #DSLive Event Option (‘Optional Advance Subscription’), will use Ascension’s Nominee infrastructure, to allow attendees of the Live Event to co-invest alongside Ascension in the winner of the pitch competition, for as little as £2k. At the moment, we’re limiting it to the winning Company of #DSLive2, but for future #DSLive competitions, we plan to enable any attendee to invest in any company that pitches at #DSLive, using the same structure.

How the #DSLive Event Co-Investment Option works

The #DSLive ASA has an Optional Advance Subscription clause, which allows a maximum capacity of £100k to be allocated to attendees of the Live Event (i.e. someone that registered and attended #DSLive). Once the Live Event has finished, attendees will have 24 hours to express an interest in investing to info@debutsessions.co.uk. The DS Team will then notify the Company, within 7 Business Days, if Ascension wishes to take up the Optional Advance Subscription, and how much they wish to take up (as little as £5k up to a maximum of £100k). If there is a lot of interest, leading to an aggregate oversubscription, the Ascension team will work with the winning company to decide allocations.

The potential investors will then be asked to sign up to the Ascension Syndicate Fund, where their investments will be pooled together under Ascension’s Nominee structure (MNL (Ascension) Nominees Ltd). The investors will be the ultimate beneficial shareholders and will benefit from EIS relief (and potentially up to 50% of their investment under SEIS relief), although it will be MNL (Ascension) Nominees Ltd that sits on the Cap Table of the Company (pooled together with the Ascension investment).

4. The Other Commercial Terms

Vesting

In keeping with the market standard for pre-Seed, the Company's Founders will have a reverse vesting schedule of 25% vested on completion, with the remaining 75% vesting monthly over a 3-year period.

Option Pool

A 6% ESOP (Option Pool) will be introduced once the funding round has closed, meaning the new investors will share the additional dilution impact, alongside the founders.