By Abbie Main, Sales Manager at SeedLegals
“Move fast and break things” was Mark Zuckerberg’s now famous motto when Facebook was growing. The approach captured the minds of many aspiring entrepreneurs who wanted to grow fast and succeed faster. It was about seizing the opportunities available to you to accelerate your path to a profitable business.
This high-energy motto is still embraced by many startup founders today. But they face a problem. Growth needs financing. And this funding is often slow to arrive.
Inexperienced founders often don’t realize that the traditional funding schedule has seasons. There are high and cold seasons, and these affect businesses and investors in different ways. It can be frustrating if you want to grow fast without limits. To maximize your success in fundraising, it is important to synchronize with the seasons or transcend them.
Fundraising has three peak seasons – and a low season
At SeedLegals, we have closed more funding rounds in the UK than any other organisation. This means that we have unique access to fundraising calendar data, which reveals a detailed picture of UK investing seasons.
For the traditional fundraising model, the first three months of the year are the most popular for investing. In Q1 2022, we closed 31% more funding rounds than in Q4 2021. Some rounds open and close within two months, compared to the average round of five months. Year-over-year, the most common month for closing funding rounds is March. Why is the start of the calendar year so busy? This is the result of the UK financial year, which ends in April. It makes sense for investors to settle the final details before the end of the first quarter and before submitting their annual reports to HMRC.
After March, funding cycle closes peak again between May and June. We believe this spike is due to a rush to close investment deals ahead of the summer, when many take time off work and founders encourage investors to close their deals. Likewise in December, tour closures peak again. Besides being another popular time for holidays, December is also the natural end of the year. So we’re seeing companies keen to close their investment deals before the start of the new year.
In summary, the peak season for increasing investment in the UK runs from January to March, with the peak increasing towards the end of the UK financial year. We also see two mini peaks in early June and December. Low season – the worst time to start fundraising or trying to get a deal – is summer. When you are aware of this pattern, it is easier to make better business plans for the coming year.
But what if you want or even need to fundraise during the summer? A “go fast” approach sometimes cannot wait for spring. To do that, you’ll need a completely different strategy — and that’s where founders can transition to nimble funding.
Take investments anytime with agile fundraising
The traditional concept of a “funding cycle,” where a startup aims to raise a certain amount within a set time frame, has been the go-to model for decades. But as founders have grown more frustrated with the bureaucracy, effort, and time (sometimes up to six months) required to complete these funding rounds, we’ve seen the growth of a new way to raise funds: the nimble financing.
Agile Fundraising is a refreshing alternative to the traditional fundraising method. With agile funding, you raise funds whenever you want. When opportunities arise, you can take cash on the spot.
This benefit alone sounds pretty compelling, but there are three other reasons why we find founders prefer agile fundraising.
First, it’s faster. At SeedLegals, we’ve helped companies use agile funding to reduce the time it takes to raise the funds they need by 80%. Second, it’s cheaper. Legal tech companies like SeedLegals can make agile funding services cheaper not only because they’re faster to do, but also because we’re using automation to help founders compile, share, and sign documents. Third, agile funding is an antidote to fundraising “low seasons” – for example, at the start of the second quarter, when investors ended their spending spree in March, we see a 25% increase in agile funding. .
For founders interested in fundraising outside of peak calendar seasons, Agile Funding is an effective solution. At SeedLegals, we’ve seen a significant increase in the number of founders using agile funding over the past few years – and at all times of the year. For the “move fast and break things” generation of startups, the traditional funding process is not suitable. It is too early to predict whether funding cycles will be replaced by agile funding. But for now, being able to invest at any time allows companies to move quickly over the summer – if you break a few things along the way, you can relaunch whenever you need to.
To learn how SeedLegals can help you accelerate funding cycles, qualify for SEIS/EIS, claim R&D tax credits and more, visit SeedLegals