Setting up for the seasons: How to get ahead when starting up
Over the past year, tech startups across the UK and Ireland have raced ahead of the rest of Europe, making up 38% of the combined valuation of European unicorns 2021. The UK & Ireland combined generated the most valuable companies with an impressive combined unicorn valuation of EUR 138 bn -the highest percentage across the continent.
The market is therefore seeing great acceleration characterised by innovation and big ideas. This may look great from the outside, however for those only just launching their business there are some initial formalities that must be followed rigorously if the business is to take off.
Organisation is a key skill needed throughout every phase of business building however the early stages are particularly instrumental. You should be especially careful to ensure you are ticking all the boxes in good time - key investment milestones should be a priority across business strategy, however they need not be time consuming if properly accounted for in advance. Using the following pointers, you should be able to spread your time more efficiently across multiple aspects of their business.
Implement habits that champion efficiency pre-launch
When it comes to organising the intricacies of a business, you should start as you mean to go on. Having everything in order prior to the launch date will set the tone for the rest of the financial year, allowing you to focus your attention on more pressing tasks.
To begin with, and while not crucial, it's good to have worked out the founding equity in the company before or on the day the company is first incorporated. The reason being that at this point, the company is assessed to have little or no value. A common mistake founders make is to quickly incorporate the company on a cheap website with one singular founder, then think "we'll sort out our shareholding alongside everything else when we raise". The issue is that when they're raising, the company will likely have a value (north of £1M), meaning issuing co-founder shares can invoke tax liabilities. If they have it sorted, this will save unnecessary time spent on laborious paperwork and accountancy fees.
Ace your seasonal investment calendar
The most important factor to consider is seasonality. Investment isn’t a one stop shop, and founders looking to succeed should incorporate the seasonality of investment opportunities into strategic planning. Making the most of ‘hot’ periods will make raising investment easier and put your business miles ahead against competitors that have put planning on the back foot.
Keeping up with various deadlines can be difficult to say the least, however failure to do so can lead to penalties and loss of tax benefits for investors which won't exactly make you popular with the investors who have entrusted you with their hard-earned cash and could ultimately discourage funding opportunities.
- January - April: end of the tax year
The S/EIS scheme is one of the biggest drivers of angel investment in the UK. It works by offering tax relief to investors looking to invest in seed-stage startups. With April 5th marking the end of the tax year in the UK, investors are forced to work to a deadline meaning they are keen to hook onto new opportunities. Each year, this date causes somewhat of a scramble amongst investors wanting to maximise their allowance for the year, or get their investments in early for the next year having already used their current allowance.
Filing the correct paperwork to be eligible for investment around this period is essential. The timing of this one also benefits from the added bonus of post-Christmas, when sales numbers may be at a high, making the company seem more investable.
- May - August: summer
Founder frustrations tend to reach a high in the summer months - full of ambition that is seemingly unmatched by holidaying customers and investors. These frustrations are even more so when fundraising, and closing a round can be the difference between the business progressing and shutting its doors.
Building on the pre-April peak, we see another one in the run up to August. If the deal isn’t closed by the end of July, founders will most likely be waiting until September to sign a name on the dotted lines.
- September - December: annual returns and Christmas
The investment rush hits another peak in the run up to Christmas. Investors like to get everything done and dusted before they go on Christmas break (normally from mid-December onwards), so if you are looking to secure opportunities at this time, you should aim to impress investors by finishing up in early December, making both of your lives a little easier.
Founders, if you’re wanting to take some time off over the holidays to spend time with family and friends, you should also keep in mind that self-assessed tax returns are due at the end of January. Prioritise finishing up the investment period in early December to allow enough time to get your tax returns sorted promptly.
As a founder, it may feel as though you’re being pulled in a million different directions. However, allocating time to plan ahead for peak seasonal investment opportunities will save hours when it comes to the busiest periods in March, July and December. Hitting these deadlines will not only aid your business financially, but will also prove to investors the type of equity partner you will be moving forward with the partnership.