Raising your first investment round from angel investors

This guide takes a UK founder through a first round from angel investors, from getting the books and cap table ready to the filings after the money arrives. It explains the instruments, the valuation arithmetic and the law on inviting people to invest.
By Buzz Accounting · Updated 16 September 2026

What a first round involves

A first investment round is usually the first time a company sells new shares to people outside the founding team. This guide is about raising from angel investors, who are individuals investing their own money, often with SEIS or EIS tax relief.

In a typical round you get the company's records into a state investors can check, agree a price and terms with a lead investor, let the investors carry out due diligence, sign legal documents prepared by solicitors, and then issue the shares and report the changes to Companies House. Where investors want SEIS or EIS relief, the company also applies for advance assurance before the round and submits a compliance statement after it.

Each stage depends on documents, and a document that has to be rebuilt in the middle of due diligence delays everything after it. This guide goes through the stages in order, explains the instruments and the valuation arithmetic, and sets out the law on inviting people to invest, which applies from the first pitch deck you send.

What this guide covers

Getting the books, cap table and forecast ready
Equity, advance subscription agreements and convertible loan notes
Valuation, dilution, term sheets, due diligence and legal documents
The financial promotion rules, the filings after the round and a timeline

Getting ready to raise

Current books

Investors and their advisers start with the numbers, so bring the bookkeeping up to a recent month end and reconcile it to the bank. File the latest accounts and corporation tax return, bring VAT and PAYE up to date and clear anything overdue at Companies House. Monthly management accounts show an investor how the business has moved over the year as well as where it stands now.

A clean cap table

A cap table, short for capitalisation table, lists everyone who owns shares or has a right to them, how many they hold and what they paid. It has to agree with the register of members, the returns of allotment filed at Companies House and the latest confirmation statement. If the company was formed with a single £1 share, subdivide it so percentages work in whole shares. If founder shares carry vesting, sign section 431 tax elections within 14 days of the shares being acquired. Record any options promised in offer letters, and set out how earlier advance subscription agreements or loan notes convert.

A forecast with its assumptions written down

Investors test a forecast through its assumptions, so write them down: how customers are won, prices, how many customers leave, hiring dates and salaries, and payment terms. A monthly profit and cashflow forecast for at least the next 12 months, tied to your actual figures, shows how the money will be spent and how long it will last. Add a cautious case alongside the main one. Our runway and forecasting guide explains how to build one.

Ways to structure the investment

Ordinary equity

The simplest round is a sale of new ordinary shares. Investors pay cash, the company allots shares at an agreed price and the investors become shareholders straight away. These shares can qualify for SEIS or EIS if the company meets the scheme conditions and the shares are paid for in full, in cash, when issued, carry no preferential right to assets on a winding up and cannot be redeemed.

Advance subscription agreements

An advance subscription agreement lets an investor pay now for shares issued later, at the next priced round or on a longstop date. The agreement explains how the price will be set, for example at a discount to the next round. Companies use them to take investment before a valuation is agreed. For SEIS or EIS, HMRC requires that the money cannot be refunded in any circumstances, the agreement cannot be varied, cancelled or assigned, there is no interest and there is a longstop date, which HMRC generally expects to be within six months of signing. Apply for advance assurance before signing (VCM12025).

Convertible loan notes

A convertible loan note is a loan that converts into shares later, often at a discount to the next round price or at a capped valuation. Until then it is debt, it may carry interest, and its terms can require repayment if no round happens. Loan notes do not work with SEIS or EIS, because the shares must be paid for in cash when issued and HMRC treats shares issued on conversion as the company repaying a debt. A note can suit investors who are not claiming the reliefs, such as companies and funds.

Valuation and dilution

The pre-money valuation is the value agreed for the company before the new money goes in. The post-money valuation is the pre-money valuation plus the new money. The price per share is the pre-money valuation divided by the shares in issue before the round, and the term sheet says whether options are counted. Each investor owns the amount they invest divided by the post-money valuation. Dilution is the fall in existing shareholders' percentages. At the round price the value of their holdings is unchanged, because the new money is inside the company.

Worked example of a first round

The figures in this example are illustrative. Founder A holds 60,000 shares and founder B holds 40,000. They raise £375,000 at a pre-money valuation of £1,500,000.

Price per share is £1,500,000 ÷ 100,000 = £15.00.
New shares issued are £375,000 ÷ £15.00 = 25,000.
Post-money valuation is £1,500,000 + £375,000 = £1,875,000, with 125,000 shares in issue.
Investors own 25,000 ÷ 125,000 = 20%.
Founder A owns 60,000 ÷ 125,000 = 48%, down from 60%.
Founder B owns 40,000 ÷ 125,000 = 32%, down from 40%.

Founder A's holding is worth 60% × £1,500,000 = £900,000 before the round and 48% × £1,875,000 = £900,000 after it.

Now suppose the term sheet requires an option pool of 20,000 shares, set aside for future employee options, to be counted in the pre-money share number. The price becomes £1,500,000 ÷ 120,000 = £12.50, the £375,000 buys £375,000 ÷ £12.50 = 30,000 shares, and the fully diluted total, which counts the pool as if its options were exercised, is 150,000.

Investors own 30,000 ÷ 150,000 = 20%.
Option pool is 20,000 ÷ 150,000 = 13.3%.
Founder A owns 60,000 ÷ 150,000 = 40%.
Founder B owns 40,000 ÷ 150,000 = 26.7%.

The investors own 20% in both versions, and the 13.3% pool comes entirely out of the founders' holdings. Negotiate the size of the pool and where it is counted alongside the valuation.

The law on inviting people to invest

Under section 21 of the Financial Services and Markets Act 2000, a person must not, in the course of business, communicate an invitation or inducement to engage in investment activity unless they are authorised by the Financial Conduct Authority or the content is approved by an authorised firm with permission to approve it. A pitch deck, investor email, one-page summary, video or web page that invites people to invest in your company can each be a financial promotion. Breaking the restriction is a criminal offence carrying up to two years' imprisonment, a fine or both. An agreement that results from an unlawful promotion can be unenforceable against the investor, who may recover their money and compensation unless a court decides otherwise.

Exemptions for individual investors

The Financial Promotion Order 2005 contains exemptions, and three of them concern individual investors.

High net worth individuals (article 48). The individual signed a statement in the prescribed form in the last 12 months showing income of at least £100,000 or net assets of at least £250,000 in the previous financial year.
Self-certified sophisticated investors (article 50A). The individual signed a statement in the prescribed form in the last 12 months showing that they have been in a business angel network or syndicate for at least six months, worked in private equity or small business finance in the last two years, been a director of a company with turnover of at least £1 million in the last two years, or made two or more investments in an unlisted company in the last two years.
Certified sophisticated investors (article 50). The individual has a certificate from an FCA-authorised firm, signed within the last three years, and signed a prescribed statement in the last 12 months.

The first two exemptions cover only shares in, or debt of, unlisted companies and some related investments. The company must believe on reasonable grounds that the recipient qualifies, and the communication must start with the prescribed risk warning and company details and explain the exemption. The high net worth exemption does not cover unsolicited calls or visits. Statements signed on the higher-threshold forms in use from 31 January to 26 March 2024 stopped counting after 30 January 2025. The FCA explains the exemptions in PERG 8.14.

Whether an exemption applies depends on the facts. Take legal advice before you send a pitch deck, an investor email or anything else that invites people to invest.

Finding investors

The financial promotion rules apply however you find investors, whether through angel networks, platforms or personal introductions.

Find Investment is a platform where UK companies and LLPs raising £100,000 to £2 million can list with a plan, a deck and a short video, and investors make the first approach. It is open only to professional investors, certified high net worth individuals and self-certified sophisticated investors, and is closed to retail investors. It is run by Founder Capital LLP. Founders pay a monthly fee to list, and a listing does not mean an investor will get in touch. Founder Capital LLP is a separate firm from Buzz Accounting Ltd. Andy Jackson is a director of Buzz Accounting Ltd and a designated member of Founder Capital LLP.

Term sheets

A term sheet summarises the main terms before the solicitors draft the documents. Most of it is normally non-binding, apart from clauses such as confidentiality and exclusivity. Understand these terms before signing.

Valuation and amount. The pre-money valuation, the amount raised and the price per share.
Share class. Ordinary shares or a class with extra rights. SEIS and EIS shares cannot carry a preference on a winding up or a right to be redeemed.
Option pool. Its size and whether it is counted before the new money.
Liquidation preference. Investors are paid back before other shareholders on a sale or winding up.
Anti-dilution. Investors receive extra shares if a later round is priced lower.
Board and information rights. A board seat or observer, and reporting.
Investor consents. Decisions that need investor approval, such as issuing shares or borrowing.
Founder vesting and leaver terms. What happens to a founder's shares if they leave.
Drag-along and tag-along. An agreed majority can require everyone to sell on the same terms, and minority holders can join a sale.
Pre-emption. Existing shareholders can buy new shares first to keep their percentage.
Exclusivity and costs. How long you negotiate only with this investor, and who pays legal fees.

Due diligence

Due diligence is the investors' check that the company matches what you have told them. Expect to provide these documents, and keep them in one shared folder with clear file names.

Certificate of incorporation, articles and any shareholders' agreement
Register of members, cap table, returns of allotment and confirmation statements
Board minutes and shareholder resolutions
Management accounts, statutory accounts, tax returns and the forecast
Bank statements, VAT and PAYE records, HMRC correspondence and R&D claims
SEIS or EIS advance assurance and earlier compliance statements
Intellectual property assignments from founders and contractors
Key customer and supplier contracts
Employment and contractor agreements, option agreements and EMI notifications
Loans, grants, advance subscription agreements and loan notes

The legal documents

A solicitor drafts and negotiates the legal documents for the round.

Subscription agreement. Who invests how much at what price, the conditions for completion and the warranties the company and founders give.
Shareholders' agreement. How the company is run after the round, including consents, information rights, vesting, leaver terms and share transfers.
Articles of association. The rights of each share class, pre-emption, drag-along and tag-along. New articles are adopted by special resolution and filed at Companies House within 15 days.
Disclosure letter. The founders' exceptions to the warranties.

Resolutions also give the directors authority to allot the shares and, where needed, disapply pre-emption rights. We check that the figures in the documents match the accounts and cap table, and that the share rights work with SEIS, EIS and any EMI scheme.

Filings after the round

Within 14 days. Report any change in people with significant control, such as someone who now holds more than 25% of the shares or votes. A new person with significant control verifies their identity with Companies House and gives their personal code when added or within 14 days.
Within 15 days. File special resolutions and new articles at Companies House.
Within one month. File a return of allotment on form SH01 with a statement of capital.
Within two months. Enter the investors in the register of members, which must be done as soon as practicable, and have share certificates ready.
After four months of trading, or 70% of SEIS money spent. Submit the SEIS1 or EIS1, then send certificates once HMRC authorises them.
At the next confirmation statement. Confirm the new shareholder details and statement of capital.

Update the cap table on the day the shares are issued.

Timeline for a first round

This illustration is for a first SEIS round of £250,000 from a few angel investors. The HMRC and Companies House time limits are fixed, and the rest depends on your records, your investors and your solicitors.

Weeks 1 to 4. Update the books and filings, fix the cap table, build the forecast and take legal advice on pitch materials.
Weeks 3 to 8. Talk to investors and collect names, addresses and intended amounts.
Weeks 6 to 10. Apply for advance assurance, which HMRC aims to answer within 15 working days for most applications.
Weeks 8 to 12. Agree the term sheet and run due diligence.
Weeks 10 to 16. Solicitors draft and agree the legal documents.
Completion. Pass the resolutions, receive the money, allot the shares and update the register. File the SH01 within one month.
Afterwards. Submit the SEIS1 when the company qualifies to, and send certificates once HMRC authorises them.

On these assumptions the round takes about four months from starting preparation to money in the bank.

How we help

We prepare the accounting and tax side of a round: up-to-date books and filings, a forecast with written assumptions, a cap table that agrees with Companies House, SEIS or EIS advance assurance and the financial documents for due diligence. Investor readiness work is quoted after a first look at your books. Advance assurance is £499 + VAT, the compliance statement and investor certificates £599 + VAT and a founder share restructure £750 + VAT, and Business Pulse builds a budget and 12-month cash flow forecast from a £750 + VAT set-up. Our investor readiness and SEIS and EIS pages set out what is included.

Get the next guide by email

Leave your name and email address and we will send you the next guide when it is published, with tax tips for startups. You can unsubscribe at any time.

Common questions

What is the difference between pre-money and post-money valuation?

The pre-money valuation is the value agreed for the company before the new investment, and the post-money valuation is that figure plus the money raised. If a company agrees a pre-money valuation of £1,500,000 and raises £375,000, the post-money valuation is £1,875,000. The investors own the amount they invested divided by the post-money valuation, which is 20% in this example. Check whether the share count used to set the price includes an option pool, because that changes how much the founders are diluted.

Can angel investors get SEIS or EIS relief on a convertible loan note?

No, a convertible loan note does not qualify for SEIS or EIS relief, either when the money is lent or when the note converts. The schemes require shares to be subscribed for in cash and fully paid when they are issued, and HMRC treats shares issued to repay loan notes as the company repaying a debt to the investor. If investors want relief on money paid before the shares are issued, an advance subscription agreement that meets the HMRC conditions can be used instead.

Can we send our pitch deck to anyone who asks for it?

Only if sending it falls within an exemption from the financial promotion restriction or the content has been approved by an FCA-authorised firm with permission to approve it. A pitch deck that invites people to invest is usually a financial promotion. The exemptions for high net worth individuals and self-certified sophisticated investors need a statement signed by the recipient within the last 12 months and a prescribed warning at the start of the document. Take legal advice before sending the deck to anyone.

What do we file at Companies House after the round?

File a return of allotment on form SH01, with a statement of capital, within one month of allotting the shares. Special resolutions and new articles go to Companies House within 15 days. Changes to people with significant control, such as an investor who now holds more than 25% of the shares, must be reported within 14 days of confirming the change. The company also enters the new shareholders in its own register of members within two months and confirms the updated shareholder details at the next confirmation statement.

How long does a first angel round take?

There is no fixed length, and the illustration in this guide takes about four months from starting preparation to completion. Some parts have set timescales. HMRC aims to answer most advance assurance applications within 15 working days and complex ones within 40, and an offer of new shares to existing shareholders under their statutory pre-emption rights must stay open for at least 14 days unless those rights are disapplied. The rest depends on how ready your records are and how quickly investors and solicitors work.

Can investors in a first round have preference shares?

Investors can hold preference shares, but those shares will not qualify for SEIS or EIS if they carry a preferential right to the assets of the company on a winding up or a right to be redeemed. SEIS and EIS shares can carry a preferential dividend only where nobody can vary the amount or dates and unpaid dividends do not roll up. If some investors in the round are claiming the reliefs and others are not, the company can issue a different class to each group, so check the share rights before the term sheet is signed.