🧪 Bio Manufacturing Launchpad, US Fundraising
Here's your Campfire for the 13th of November, 2023. Find today's deep dive on raising in the US below.
💼 This issue of Campfire is sponsored by Shepherd and Wedderburn's initiative to supercharge start-ups and scale-ups. Be sure to follow the Start to Scale LinkedIn page for useful videos and posts designed to help founders.
🌊 Updates & Opinions
🚀 Scottish companies building in bio-based manufacturing can apply for support packages ranging from £25,000 to £1m as part of the new Launchpad launched by Scottish Enterprise and Innovate UK. DGT IN
🌲This year, Scottish Enterprise has awarded more than £750,000 in green heat feasibility grants to 16 businesses, hoping to help strengthen Scotland’s green heat supply chain. Full list here. DGT
💼 The Shell LiveWIRE entrepreneurship mentoring and support programme has launched in Aberdeen and is open to SMEs from 2-149 employees, are generating revenue, and at least 2 years old. SFN TS
✈️ Virgin Atlantic has received a permit from the UK’s Civil Aviation Authority (CAA) to embark on the world’s first transatlantic flight using sustainable fuels. DGT
📣 Asks & Offers
🤨 Campfire is looking into something: know any foreign founders based in Scotland who are or were on the UK Innovator visa and who used a for-profit organisation to help secure or sponsor it (e.g. not a University)? If so, we'd love to speak with them.
👭 Interested in connecting with possible co-founders? Fill in your listing on Cofounder Curious today! Connect with others for possible cofounder matching here.
✍️ Want to write something for Campfire? Have an opinion you'd like to share? get in touch!
🦸♀️ Fundraising in the US
By Robert Gelb
This is part four of a series about simple things you can do early to save time and money when planning your first fundraise written in partnership with Shepherd & Wedderburn.
In my experience, the prospect of raising investment in the US scares founders in Scotland. Heck, raising down south seems to scare folks too. Perhaps there are decent reasons for this, or perhaps the system up here encourages a more insular look for early-stage incubation. One that might be grounded in a combination of perceived ease and comfort, but also one that sets us up for unnecessary challenges down the road.
It also often opens founders in Scotland up to a perception that everything about raising in the US will require a cosmic shift in their approach. From new company structures to completely re-doing docs - we're almost conditioned to think that what we start with here will never be good enough for the 'grown up' USA.
The reality, as is often the case, is not that black and white. Speaking with Stephen and John from Shepherd and Wedderburn, they had a lot to say about the differences between the way rounds can sometimes work in the US and gave some useful tips for minimising the issues you might have when it comes time to raise in the states.
As a disclaimer: we get into quite a few areas, so this article is a bit beefier than usual. I'll admit, they started getting positively giddy when ‘nerding out’ about very specific structural differences, but they're lawyers, what can you do?
Common differences in deal structures
One overarching observation Stephen and John convey is that the differences between the US and the UK in terms of deal structures, term sheets, and funding round approaches are increasingly aligning. What had been true a few years back might not be true this year, or even the case going forward. In essence, you're going to see me use a lot of 'usually's' and 'in general's'. Apologies in advance.
Historically, the US has been seen as more 'founder-friendly' (however that's becoming less of an issue). By 'founder-friendly', they mean things like ‘less likely’ for founders to be expected to provide warranties and preferring relatively standard vesting of equity over a period of time (like four years with a one-year cliff) without the concept of a good leaver or bad leaver. In the UK it's more common to have good leaver, bad leaver, and sometimes 'normal' leaver clauses. This means that in the (generalised) UK approach, there might be a consequence for leaving, such that if the founder left, then possibly their vested shares would have to be offered for sale to other existing shareholders in the company, meaning the founder might be less likely to get benefit from the future growth in the business. In the (generalised) US approach, it's just time vested.
It's not necessarily the case that the US versions/approaches are better than the UK ones, just that they're different. There are, for example, some good arguments for good leaver/bad leaver provisions, and it's not to say having them is a dealbreaker for raising US investment, it's just something to consider.
As John noted, "The 'recommended' deal docs put forth by the BVCA (British Venture Capital Association) are increasingly aligning with that of the NVCA (National Venture Capital Association) and, for example, now use vesting / deferral of shares on leaving and are no longer asking for founders to provide warranties."
Stephen then expanded, "On the other hand as a result of the lack of warranties, it's usually the case that US VCs take a more active approach to due diligence than UK ones."
Making your life easier when going for US money
US investors have a lot of access to early-stage opportunities, so it is most common for UK companies to start engaging with US institutions later in their fundraising journey. That's not to say you shouldn't be seeking out US angels or pre-seed funds earlier, but as a gross generalisation, 'US money' seems to be most common (and consequential) when looking to build institutional rounds.
Rights
Because of this, it's often the case that in the early days, Scottish founders might have quite a large number of people to come on board in exchange for relatively modest amounts of money. While that's not inherently bad, often the types of conditions and docs that are used for those earlier raises might not be fit for purpose. Things like high levels of investor control, consenting rights, appointment rights for the investor in respect of board seats or observer/information rights that are not tagged off any minimum shareholding in the company, and broad pre-emption rights.
"Seeing things like this might cause a US investor to scratch their head, particularly around the control issues, because while there's some sense in major investors having a say in a company for so long as they remain major investors, if they are diluted into becoming a minor investor does it still make sense to have a board seat (for example)?" John said. We dug into this in an issue two weeks back, so head there if you want more info.
Because of this, you could have a situation where the US VC is presented with terms that are unfamiliar and not aligned with the expectations of the US market. As Stephen noted, "well-advised UK companies will put in place equity documentation that will accommodate investors, whether those are European or US investors, rather than necessarily defaulting to what's just presented to them by the early-stage local investor. Oftentimes that kind of path of least resistance at the early stage will actually create barriers to making your subsequent round more straightforward." It's always a balance and making sure you have a well-drafted shareholder agreement that properly addresses (and manages) key issues, such as pre-emption rights, information rights, and consent requirements will be key.
I asked them both about problems that seem small and that you might not think about, and John immediately pointed to currency. "Currency sounds simple but you'd be surprised with how many heads end up getting scratched working it out. If a US investor is investing in dollars, but your angels or friends and family round was on Sterling, then when it comes time to run a capital stack on an exit it's obviously an issue." In essence, make sure you include provisions catering for the different currencies.
Self-certification was another area Stephen was keen to highlight. This is where your angel investors sign a self-certification form indicating they are, indeed, sophisticated investors. In the US, it's referred to as an accredited investor. "In the US, securities law is quite strict, and not having the right disclosures from your investors on either side of the Atlantic makes for potential issues going forward." He continued, "A later-stage investor will require that everyone has reported as being an accredited investor, and you want to know that at the point that you get to your final exit, there isn't going to be somebody creating an issue at the fact that they've been unfairly treated on the way through because they weren't a sufficiently informed person to understand what it was that they were investing in." Stephen and John have heard of this happen to others in the market and remedying it can be anything from a bit of a tedious headache to actually jeopardising a deal. Luckily if you're using a firm like Shepherd and Wedderburn that's used to US securities law and works with companies with major US investors, this is usually all taken care of as a matter of course in the earliest of stages.
Do you need to change your docs?
Short answer: it depends, but you shouldn't as long as you're using relatively standard documentation from a firm/source that understands US securities law. Documents are increasingly aligning as we discussed above, and you shouldn't feel like you need to completely re-write your articles because of some assumption that the UK's default is somehow wrong.
If, however, you've let Chat GPT design your articles, or you're working off of a non-standard/non-BVCA aligned set of docs, it's important to check to make sure everything is kosher.
Do you need a US entity?
Usually, no. It's entirely possible and common for US investors to invest in UK entities. Sometimes certain accelerators / incubators require you to, like Y-Combinator, which is one thing to consider when looking at those options. Creating a US topco / holding company makes sense if you are well networked in the States or you live in the States for a lot of your time and are likely to have exclusively US investors. In that case, you can easily set up a subsidiary here for operations purposes. The opposite is common as well where you set up a US subsidiary for hiring staff there. It's a well-trodden path, especially for operational efficiencies, but just not needed for investment.
They both spoke about a particular buzzword: "Folks often think they need to do what's called a 'Delaware flip' where a new entity in Delaware is suggested to make it easier for US investors to invest in an entity they are familiar with. If you're being asked to do one, it's important to think through the consequences. If you're not sure that there are real advantages, then it can be costly to maintain and difficult to undo on the documentation side." Stephen said.
TL;DR: It's absolutely possible to have UK documentation that meshes with US investment, easily deals with US securities law, and caters for common expectations from the US investor side. And it happens every day.
As with anything, these are generalisations, not absolutes, and it's important that while you're mindful of potential pitfalls, you don't let it prevent you from taking action that's to the greatest benefit to your business. From having the right rights in place to positioning your company for the least number of hurdles when it comes to docs that are right for either side of the ocean, making sure you're squaring off stuff early makes everything much more straightforward later on.
Shepherd & Wedderburn's innovative and personable approach helps companies from first incorporation onwards (including through to an exit – if that’s the goal). Their global reach means they can scale and grow with you, like they have with clients like Epic Games, FanDuel, TwoBigEars, Optoscribe and TVSquared.
👉 To learn more, check out the Start to Scale LinkedIn page for useful videos and posts designed to help early stage founders and send an email starttoscale@shepwedd.co.uk & set up a chat.
📅 Events
⚖️ 14/11, 11:30 🗺️ Langholm: Intro to Techscaler (Langholm): If you’re interested in finding out more about Techscaler and what support is available then we’d love to have you join us! MORE INFO
👷♀️ 14/11, 13:00 🗺️ Dundee: Commercialising Tech Innovation: The aim of this event is to expose our staff, students, graduate network, and our ever-growing Tech community to opportunities that will allow them to commercialise tech research, products, or services. MORE INFO
📈 14/11, 16:00 🗺️ Edinburgh: Hiring to Scale: Attracting Talent: How to get the right candidates, employee retention, getting the pay levels right, Panelists: Michelle Lownie, CEO @ Eden Scott; Alex Lamley, Partner @MBM Commercial; Colin Hewitt CEO & Co-Founder @Float; Sean McGrath CEO @Entrepreneurial Scotland. MORE INFO
🧑💻 14/11, 17:00 🗺️ Stirling: In Conversation With CodeBase. Unique Pathways Into Tech: This will be an opportunity to hear firsthand accounts from tech professionals about their career journeys and the trials and tribulations that they have faced along the way. Gain practical insights, learn from experiences, and connect with industry experts and professionals . It's an opportunity to expand your knowledge and network in the tech field. MORE INFO
🧑💻 14/11, 18:30 🗺️ Glasgow: Glasgow Javascript Meetup: This is the first GlasgowJS JavaScript Meetup event since early 2020. Come and join other JavaScript developers for a social & networking evening. MORE INFO
🕹️ Series: Games Talk Live: A series of short talks interspersed with general networking over 3 days across Edinburgh, Dundee and Glasgow to encourage collaboration and communication between local games developers, and networking with visiting publishers and guests.
🎮 14/11, 18:00 🗺️ Edinburgh: MORE INFO
👾 15/11, 18:00 🗺️ Dundee: MORE INFO
🕹️ 16/11, 18:00 🗺️ Glasgow: MORE INFO
🎨 15/11, 09:00 🗺️ Edinburgh: Startup Grind Marketing Planning Workshop: Join this marketing workshop, curated for Startup Founders and Leaders, where we will help you shape your thinking for your 2024 Marketing Plan! MORE INFO
💻 15/11, 09:30 🗺️ Dumfries: Coworking Day [South of Scotland]: We’re excited to invite our tech and business community, and anyone wishing to connect with our local community to our coworking days, taking place at Flourish in Dumfries. MORE INFO
👥 15/11, 12:30 🗺️ Dundee: Dundee Founders Meetup and Coworking: Join us for our first Dundee Founders Meetup & Coworking event. Open to tech founders within the Dundee & Tayside community. Come along for the lunch-time networking and spend the afternoon at the CyberQuarter coworking with other founders and CodeBase team. MORE INFO
🤓 15/11, 18:00 🗺️ Glasgow: Tech Leaders Forum: Being, or becoming, a leader is never a straightforward journey - there’s often a lot of challenges and barriers to overcome, alongside mistakes made. MORE INFO
🤓 15/11, 18:30 🗺️ Stirling: Tech Meetup Stirling: This month the talk will be "Empowering Mobile Development Using Flutter/Dart" by Karam Helmi. MORE INFO
🇺🇸 16/11, 16:00 🗺️ Online: Office Hours: Approaching the US Market: Meet Kevin A. Malecek, a delegate from the City of Mentor (Ohio) for advice and guidance on the best practices on approaching the US market. MORE INFO
🌉 16/11, 17:30 🗺️ Glasgow: Bridging Communities: In collaboration with Glasgow Caledonian University, The Melting Pot and some of the city's most engaged community builders, we are offering another chance to gather, connect and make a little magic happen. MORE INFO
📦 17/11, 17:30 🗺️ Edinburgh: ProductTank Edinburgh: End of Year Celebration: Join us for a festive and fun-filled evening as we gather to wrap up an incredible year of ProductTank Edinburgh meetups! This is a chance for our vibrant community to come together, reflect on the milestones we've achieved, and shape the future of our meetups. MORE INFO
💻 21/11, 08:30 🗺️ Edinburgh: Digital Scotland 2023: DigitalScotland is the largest annual gathering of public sector technology professionals, where global govtech leaders share technology insights and lessons in digital transformation, leadership, skills, cultural change and data-driven innovation. MORE INFO
🤝 21/11, 12:00 🗺️ Dumfries: AccelerateHER + Techscaler Meetup: South of Scotland: The AccelerateHER and Techscaler by CodeBase teams are excited to be joining forces in bringing dedicated meetups to life across Scotland for this community and peer-support building activity to grow. Meetups where you can come together, hear inspiring stories from fellow women and non-binary founders, and connect for ongoing peer-support. MORE INFO
💼 21/11, 16:00 🗺️ Edinburgh: Hiring to Scale: MBM Commercial, Barclays Wealth and Barclays Eagle Labs have come together to for an exciting series where we dive deep into the world of scaling your team! Whether you're a startup or an established company, finding and hiring the right talent can be a daunting task. But fear not! Our event series is here to guide you through the process, providing valuable insights and practical tips. MORE INFO
👸 21/11, 17:30 🗺️ Stirling: Digital Skills 4 Girls [Stirling]: Digital Skills 4 Girls is a monthly workshop for girls and non-binary people who want to learn new digital skills or develop existing skills. The recommended age for attendance is 10-15. MORE INFO
🧑💻 21/11, 19:30 🗺️ ONLINE: How to become an Angel investor with £1,000: Demystify angel investing myths and learn how you can strategically navigate and derive value from the investment landscape. MORE INFO
🙏 22/11, 0900 🗺️ Glasgow: Founders Open Day Glasgow: Wellness Theme: A day for founders from all stages to get together, take part in fireside chats and see what Eagle Labs & CodeBase can offer the community. MORE INFO
💻 22/11, 09:30 🗺️ Dumfries: Coworking Day [South of Scotland]: We’re excited to invite our tech and business community, and anyone wishing to connect with our local community to our coworking days, taking place at Flourish in Dumfries. We're hosting these coworking days every Wednesday from 25th October - 13th December 2023, where you can join us for startup chat, networking, and to get to know you local tech-curious peers. MORE INFO
🤝 22/11, 12:00 🗺️ Stirling: AccelerateHER + Techscaler Meetup: Central Scotland: The AccelerateHER and Techscaler by CodeBase teams are excited to be joining forces in bringing dedicated meetups to life across Scotland for this community and peer-support building activity to grow. Meetups where you can come together, hear inspiring stories from fellow women and non-binary founders, and connect for ongoing peer-support.. MORE INFO
🌐 22/11, 18:00 🗺️ Edinburgh: Cyber Scotland Connect: November Meetup!: Cyber Scotland Connect is proud to host an in-person event at CodeBase Edinburgh, with some excellent speakers lined up! MORE INFO
🔢 23/11, 09:00 🗺️ Edinburgh: DIGIT Expo 2023: DIGIT Expo is the largest annual technology event in Scotland. Attendees will experience a packed conference programme featuring keynotes, interactive workshops, and panels, alongside an extensive exhibition hall and networking area. The event will be held in-person at Edinburgh's International Conference Centre.. MORE INFO
🛷 23/11, 09:45 🗺️ Glasgow: Scottish Edge - EDGE22 Final: We're delighted to welcome back our fantastic partners and supporters to the exhibitor and networking atrium - on hand to offer expert advice on all areas of business growth. MORE INFO
🛠️ 23/11, 11:00 🗺️ ONLINE: Building your Sales Foundations as a Startup: Join HubSpot for Startups and CodeBase in this sales masterclass with Anna Gordon, Partnerships Manager at HubSpot for Startups UKI. MORE INFO
👥 27/11, 17:30 🗺️ Edinburgh: NoCode Scotland Meetup #8: Whether you're a NoCode enthusiast or just looking to get started learning how you can build software without writing code, you're very welcome to come along! MORE INFO
🤝 27/11, 18:00 🗺️ Edinburgh: Startup Founders Meetup: A combination of tactical fireside chats with experienced entrepreneurs and plenty of opportunities to network with other founders, potential cofounders, and investors. This month: Danae Shell from Valla. MORE INFO
🍃 28/11, 08:30 🗺️ Edinburgh: GreenTech Meetup!! (November): Come and enjoy some breakfast and chat with some fantastic people in the GreenTech community - hosted by Barclays Eagle Labs and CodeBase. MORE INFO
💼 28/11, 16:00 🗺️ Edinburgh: Hiring to Scale: MBM Commercial, Barclays Wealth and Barclays Eagle Labs have come together to for an exciting series where we dive deep into the world of scaling your team! Whether you're a startup or an established company, finding and hiring the right talent can be a daunting task. But fear not! Our event series is here to guide you through the process, providing valuable insights and practical tips. MORE INFO
🤝 28/11, 18:00 🗺️ Dundee: Dundee Data Meetup: Welcome to the monthly recurring Dundee Data Meetup, a vibrant community-driven event that brings together curious learners, data enthusiasts and professionals to explore the captivating world of data and its applications. We're dedicated to fostering an inclusive community where individuals from diverse backgrounds can come together to share knowledge, spark ideas, ignite curiosity, foster collaboration, and promote responsible data practices. Each month, we'll be featuring different themes, so check out our updates on our socials and Eventbrite page. MORE INFO
💻 29/11, 09:30 🗺️ Dumfries: Coworking Day [South of Scotland]: We’re excited to invite our tech and business community, and anyone wishing to connect with our local community to our coworking days, taking place at Flourish in Dumfries. We're hosting these coworking days every Wednesday from 25th October - 13th December 2023, where you can join us for startup chat, networking, and to get to know you local tech-curious peers. MORE INFO
💵 29/11, 10:00 🗺️ Edinburgh: Innovation Tax Dojo: de-risk your value creation & product development: At the Innovation Tax Dojo, you'll gain valuable insights, practical strategies and open discussions on how R&D tax credits can help you balance innovative developments and cashflow generation. MORE INFO
🏭 29/11, 15:00 🗺️ Stirling: Tech Idea Factory: Idea Fest: This event, hosted in collaboration with the University of Stirling's Enterprise Programme, is a dynamic event designed to inspire innovation and collaborative thinking within the tech community. The event kicks off with an introduction to the programme, setting the stage for focussed participation. MORE INFO
🤝 29/11, 17:00 🗺️ Glasgow: Asian Founders Community Meetup: A dedicated event aimed at supporting and empowering Asian entrepreneurs on their journey to business growth. MORE INFO
📝 29/11, 17:15 🗺️ Edinburgh: Barclays and CodeBase, Edinburgh's monthly quiz!! - November 2023 edition: Join us for this month's pub quiz - bringing together the CodeBase and Edinburgh community for a bit of fun! MORE INFO
☕ Series: Unfiltered: A series of informal catch-ups with the digital tech community in Aberdeen, Stirling, and Inverness. Come for a coffee and stay for the hotdesking!
📆 06/12, 08:30 🗺️ Aberdeen: MORE INFO
📆 06/12, 08:30 🗺️ Stirling: MORE INFO
📆 06/12, 08:30 🗺️ Inverness: MORE INFO
🎯 Deadlines
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That’s all for this week - have a great one!
Team 🔥Campfire