Fundraising and Investment in 2021 - Image by Ichigo121212 from Pixabay It seems that the Coronavirus pandemic has done nothing to dampen investment into technology businesses both in the UK and globally. We continue to see a boom in technology businesses seeking and securing investment for their businesses. Active sectors include healthcare, education, facilitating remote working and sustainability.

Here we look at some of the legal issues facing businesses trying to fundraise in 2021/2022.

Due Diligence

We have seen investors making specific enquiries about reliefs that the business may have taken out during the Covid-19 pandemic. This includes:

  • How the business intends to repay any CBILS loan?
  • Any rent arrears or arrangements with landlords?
  • Whether the firm used the furlough scheme properly?
  • Are redundancies required as the furlough scheme ends ?


We have seen a rise in warranties within the legal documents, specifically on Covid-19. If you are seeking an investment, you must carefully address any issues arising during 2020/2021. Then disclose any issues the business may face as a result. You should also remember to include any outstanding bounce-back loans in your financial statements. These are regularly overlooked.

As part of any formal disclosure, it is not inappropriate to highlight that the business may have been affected by the pandemic. An investor is going to want to see how the business reacted. Additionally, what you did to successfully navigate the challenges you faced.

We expect to see warranties in respect of Covid-19 arrangements and its impact for some time to come. Especially given the risk to investors where a scheme may have been misused or there are contingent or future liabilities the business is facing.

Privacy policies

In addition to pandemic concerns, investors will want to scrutinise privacy controls and arrangements as part of their investor due diligence. Data protection will continue to be a strong focus for all technology businesses especially after September 2021. Why? WhatsApp received record fines of €225m by the Irish Watchdog. Therefore, businesses should ensure their privacy policies and processes are continually reviewed and updated.


SEIS and EIS are favourable tax incentives aimed at encouraging investment into the UK SME market. They remain available and attractive for qualifying UK investors looking to mitigate their taxes. Innovation in the UK tech market has exploded and with it we have also seen a trend towards non-UK investors looking to invest in UK businesses. With this in mind, we have also seen trends towards issuing different types of shares and the rise of convertible loans notes and preference shares. These fell out of fashion in the UK market due to SEIS/EIS restrictions.

Hence it is key when structuring your deal to understand the type of investor. Consider different structures for different investors, especially when dealing with UK investors falling under the constraints and requirements of the SEIS/EIS scheme and non-UK investors or funds.

Online platforms

As much of the world shifted from face-to-face interactions to online remote practices, so too did fundraising. We have seen a significant shift towards the use of online platforms throughout the course of 2020/2021. Even as the world slowly tries to return to normality, we expect to see the use of online platforms prevailing. Therefore, before using an online investment platform it’s vital that you do your due diligence on the platform itself.

You should ask:

1.       Is the platform regulated by the FCA?

If someone is promoting any investment into your business, they should be regulated by the FCA unless they can rely on an exception or exemption.

Many of the online investment platforms are now regulated. It means you can widen the target audience of your campaign. However, some online platforms are not regulated.

If the platform you are looking to use is not regulated, you need to fully understand why they have taken the decision not to be regulated. Keep firmly in mind the potential restrictions and impact that this has on you as the business owners. Not only will you be able to present your business investment opportunities to fewer people, it also restricts the potential recourse for those who invest. Potentially, your business becomes a bigger target to disgruntled investors.

2.       Fees

Do you understand all the fees you will be paying the platform? For many platforms, you still need to secure several of your own investors. Make sure you understand the basis for calculating any fees. Does this apply to your own investors or only investors secured via the platform?

3.       What is the role of the platform in the process?

It is crucial to understand the role of the platform in the investment process. Will the platform review and approve any marketing material you produce? And if so, on what basis?

Many online platforms also act as a nominee on behalf of those investing via the platform. This is not always the case. In some instances, investors invest directly into the business. The benefit of a platform acting as the nominee is that you have one professional organisation representing all the investors who invested via the platform rather than having to correspond with each and every investor.  However, this does mean it is harder for you to make specific contact with the individuals who have invested into your business other than going via the platform.

4.       Do the terms and conditions reflect what you believe you are buying?

In its simplest form, a contract should reflect all the commercial terms of any deal. Often what a business believes it is purchasing and what is contained in the terms and conditions are not aligned. Ensure you look closely at the specific terms and conditions of any investment platform you use.

5.       Can I use my own legal documents?

It is important to understand the requirements of the online platform when it comes to substantive legal documents reflecting the investment.  Most platforms, especially those where the platform also acts as a nominee, have a minimum set of requirements for their investors. You should ask the platform for a copy of this at the outset so any discrepancies can be addressed, and expectations realigned.

All businesses and their operations are unique and should not be shoe-horned into ill fitting ‘standard’ legal documents. Many, but not all, online platforms enable you to use your own documents provided they meet their minimum requirements.  It is important that you are still able to use your own bespoke documents drafted to fit your business, if you choose. This is not necessarily widely advertised so make sure that you ask as part of your due diligence on the platform.

Have the right people on board

We hope that 2021 and beyond continues to be a boom period for investments into technology businesses. However, just as businesses look ahead, they also need to keep an eye on what they have done to get to this point to ensure any due diligence is plain sailing.

It is vital to use professional advisors that understand you and your business; the exit and/ or growth plan and this synergy will help support you through the journey.  We have seen many deals collapse because of a lawyer not understanding a party’s needs. For example, where founder’s interests have not been protected by the deal structure or the client was too anxious to ask questions.

With a trend towards online investment platforms, it is still important for businesses to remember that they can and should be doing due diligence on their investors and any investment platform they use. We ensure clients are clear of the details; to be in the driver’s seat and ultimately our role is to protect and support so do ensure you have the right people on board.

ACLF logoIn the meantime, if you can’t wait, you can contact us directly for impartial advice by visiting our website or emailing [email protected] 

Karen Holden is the Managing Director & Founder of A City Law Firm who practise both commercial law and litigation, having been admitted to the roll in 2005. If you require further advice or assistance, please do not hesitate to contact [email protected] 

A City Law Firm Limited is a leading entrepreneurial law firm in the city of London, with a dynamic and diverse team of lawyers. It was awarded most innovative law firm, London 2016 and Business Law firm 2017. They specialise in start-up business law, the tech industry, IP and investment.


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