Expert advice for founders and startups, from something that won't just agree
Early decisions are hard to undo: who you take money from, how much of the company it costs, how long it buys you. Clearspace is somewhere to put them first. It says what it thinks is wrong and why, and when its own advice wouldn't hold. Co-founders use it the same way.
“I'm asking my parents for £25k for 10%.”
Illustrative example, not a real account.
The Seed Enterprise Investment Scheme (SEIS) is a UK tax relief for people who invest in very early-stage companies. If your company qualifies, an investor can claim income tax relief of 50% of what they invest, on up to £200,000 in a tax year. That changes what a parent or friend is really risking when they put in £25k.
The company can raise up to £250,000 through SEIS. It must have fewer than 25 full-time equivalent employees and no more than £350,000 in gross assets when the shares are issued, and its trade must be no more than three years old. You can ask HMRC for advance assurance before you raise. It is optional, and it is not a promise of relief to any particular investor.
When this wouldn't hold
Investors have to meet conditions too: for example they can't hold more than 30% of the company or be employed by it (a director can claim), and they must keep the shares for at least three years to keep the full relief. Relief reduces what a backer can lose; it does not remove the risk. Whether you qualify is for HMRC and your accountant, and advance assurance is the way to find out.
“Offered £50k for 20%. That's about seven months at our burn.”
A round sells a share of the company in return for time. £50k for 20% at a burn of about £7k a month buys roughly seven months, so each month costs a little under 3% of the company.
The useful question is what you will have by month seven that makes the next round worth more than this one. If the answer is clear, the price may be fine. If it is not, the money is buying you time to find out.
When this wouldn't hold
This is not a verdict on the price. If the money also buys introductions, a milestone that moves your valuation, or hires that compound, seven months may be worth far more than it looks. It is a way to see the trade, and the trade is yours to make.
Who answers
- Business mentor: Whether this is worth doing at all, and what it costs you to do it.
- Researcher: What the evidence supports, what is still assumed, and how to find out.