Posted Wednesday 13th May 2026
Early-stage investment remains available, but investors are cautious and thorough. Term sheets are scrutinised closely, tax efficiency matters and investors expect founders to be legally organised.
Getting the term sheet right from the outset can make fundraising smoother, faster and ultimately more successful. Getting it wrong can create obstacles with investors and delay the process. It may also restrict future growth or reduce founder control in the longer term and could put the founder in a less advantageous position on exit.
Before you start
Before engaging seriously with investors, founders should pause and take stock of what they want the business to look like after the round completes. That means thinking beyond the headline valuation and asking some fundamental questions.
On a more practical operational point, when considering a fundraise, founders often fixate on valuation and dilution – but cashflow is the real clock ticking in the background. Understanding your cashflow position tells you when you actually need to raise, which is arguably more important than how much. A founder who raises from a position of strength – with runway to spare and metrics trending up – will command better terms, attract stronger investors, and avoid the desperation that leads to poor deals. Conversely, a founder who waits too long, letting cash dwindle before starting the process, hands negotiating leverage to the other side of the table.
Fundraising typically takes three to six months longer than founders expect, so cashflow isn’t just a finance exercise – it’s the strategic foundation that determines whether you get to choose your investors or settle for whoever will take the call.
Being clear on all these points early saves time, increases your chance of success and helps avoid founder/funder misalignment later.
How to do it
Step one: agree expectations early through a term sheet
Before moving into full legal documentation, founders should agree a clear term sheet with investors. This sets the commercial framework for the deal and surfaces key issues early, when there is still flexibility on both sides.
The term sheet should cover three critical areas.
First, equity. There is no single formula for valuation, particularly at early stage. Founders need to decide what percentage of the business they are comfortable giving up and ensure the cap table leaves space for future funding rounds and any employee incentive schemes.
Second, rights attached to shares. In early-stage funding, simplicity is usually best. Overly investor-friendly protections such as liquidation preferences or aggressive anti-dilution rights can make later fundraising harder rather than easier, and can unfairly shift the balance of risk.
Third, governance. Offering an investor a board seat can add value, but founders should understand how board decisions are made; it can also change co-founder dynamics. Consider whether the founder has a casting vote, whether decisions require unanimity and how much operational flexibility the board structure allows. And outside of board seats, giving investors wide-ranging vetoes can create friction in management and can limit founders’ ability to run the business.
Step two: understand SEIS and EIS eligibility
Founders should establish whether their company qualifies for SEIS or EIS relief before fundraising progresses too far.
These UK tax reliefs can significantly increase the attractiveness of an investment to eligible investors and, in some cases, influence whether a deal happens at all. If eligibility is uncertain, this should be clarified early so it can be factored into investor discussions and timelines.
Step three: make sure the business is investment ready
Legal due diligence is a standard part of any fundraising process and gaps can weaken the company’s position at a critical moment.
Founders should check that intellectual property is properly owned by the company, not individuals. Founders themselves should have appropriate employment or service agreements in place. Key customer and supplier relationships should be documented clearly and consistently.
Employment arrangements also matter. Using robust employment contracts helps avoid future disputes and reassures investors that the team is properly structured. Any historic promises of equity to advisers or service providers should be documented and resolved before investors uncover them.
The goal is to enter fundraising from a position of strength, not to renegotiate key terms under pressure because issues emerge late.
Watch out for
One of the biggest risks in early fundraising is signing a term sheet without fully understanding its implications, including where too many things are left to be agreed later. Even at an early stage, terms agreed here can shape control, economics and exit outcomes years later.
Another common mistake is underestimating how investor-friendly provisions may affect future rounds. What feels acceptable today may limit flexibility or deter new investors tomorrow.
A member who did it
Joelson advised the founders of Citizens of Soil, the premium olive oil challenger brand, on its £1.8M investment by FIGR Ventures, a private family office and various angel investors.
Citizens of Soil was founded in 2020 by Michael and Sarah Vachon with the aim of changing the way olive oil is produced, valued, and consumed.
The investment will help Citizens of Soil scale its direct-to-consumer offering, expand further into national grocery, and grow its team across digital, sales, and marketing. Most importantly, it will enable the company to support more farmers, ensuring they are paid fairly and equipped to continue regenerative farming practices that benefit both the land and consumers.
The Joelson team, led by Phil Hails-Smith (Partner) with support from Sylvia Lau (Associate), previously worked with Citizens of Soil on its Series Seed funding round in 2024.
Michael Vachon, Co-Founder of Citizens of Soil, commented:
“It was such a pleasure working with the team at Joelson on our recent fundraise. More than just being thorough and professional, they really understood what all parties were trying to achieve and worked hard to get the deal done. It’s so important to have partners you can trust to navigate the complexities of fundraising and we’d certainly work with Joelson again.”
For more case studies and articles, click here.
If you have any questions related to this article, or if you would like more information, please contact Harriet McDonald, Senior Associate in our Corporate & Commercial team.
This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.
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