FAQ
Questions about our terms.
Startup funding terms confuse most people, including founders who’ve raised before. Here’s how each part of our offer works, and why we set it up this way.
The basics
How the deal works
A fixed stake agreed at the start is nearly always the wrong size. If the build is quick, we're overpaid. If it runs long, we're underpaid. A deferred fee pays us for the work we do, and the buyout lets you keep the shares you'd otherwise have given away.
It's the part of our work you don't pay for during the build. We value our time at the agreed day rate, and whatever you don't pay becomes the deferred fee. Depending on the option you pick, that's all of our work or most of it. You settle it later, when one of the buyout triggers happens. Think of it as an IOU that grows as we work.
Not before a trigger. Once a trigger happens, the fee has to be settled in one of the agreed ways. If there's no cash at the time limit, the non-cash options apply: revenue share, conversion to shares, or an extension.
There are a few exceptions. The fee is due in cash straight away if the company sells or transfers the product we built, closes while it still has money, raises a qualifying round without settling with us, or stops being run by its founders. Your accountant can tell you how to record the fee in your accounts.
Cash from buyouts lets us build for and invest in more startups. It also keeps your cap table tidy. When you raise, the company belongs to its founders and investors, and your old development team isn't on the list.
A fixed stake agreed at the start is nearly always the wrong size. If the build is quick, we're overpaid. If it runs long, we're underpaid. A deferred fee pays us for the work we do, and the buyout lets you keep the shares you'd otherwise have given away.
It's the part of our work you don't pay for during the build. We value our time at the agreed day rate, and whatever you don't pay becomes the deferred fee. Depending on the option you pick, that's all of our work or most of it. You settle it later, when one of the buyout triggers happens. Think of it as an IOU that grows as we work.
Not before a trigger. Once a trigger happens, the fee has to be settled in one of the agreed ways. If there's no cash at the time limit, the non-cash options apply: revenue share, conversion to shares, or an extension.
There are a few exceptions. The fee is due in cash straight away if the company sells or transfers the product we built, closes while it still has money, raises a qualifying round without settling with us, or stops being run by its founders. Your accountant can tell you how to record the fee in your accounts.
Cash from buyouts lets us build for and invest in more startups. It also keeps your cap table tidy. When you raise, the company belongs to its founders and investors, and your old development team isn't on the list.
Money
Multipliers, caps and revenue share
Because we're lending you our time as well as selling it. An agency sends an invoice for its full rate every month. We work for free or at a reduced rate for months, then wait a year or more for the rest, with no guarantee we'll get it. The multiplier, typically 1.25 times the fee on the reduced rate and 1.4 times when the build is fully deferred, covers three things.
Risk. Some of the startups we build for won't make it, and we'll never be paid for that work. The companies that succeed have to cover the ones that don't.
Waiting. £60k today is worth more than £60k in 18 months. Lenders charge interest for the same reason. 1.25 times over 18 months works out at about 16% a year.
It usually still costs you less. Without us, you'd need to raise that money sooner, at a lower valuation, and give away more of your company. Paying the multiple later is often cheaper than that.
Because we carry all of it. On the reduced rate you pay part of our day rate as we go, so less of our work is at risk, and for less time. That's why a fully deferred build typically settles at 1.4 times the fee in cash, against 1.25 times on the reduced rate. In our example, paying cash costs £70,500 in total on the reduced rate, including the monthly payments, against £84,000 fully deferred.
On the reduced rate, cash is cheaper, on purpose. We'd rather be paid in cash, so we make it the better deal for you. In our example, paying cash costs £52,500. Converting gives us £56,000 of shares at your round price, and those shares could be worth a lot more if you do well.
On a fully deferred build the two are close: £84,000 in cash, or £80,000 of shares. If the company is doing well enough that you'd rather keep the cash, converting may suit you, and we're glad to share in how it goes.
New investors want their money to fund growth. Keeping our share of the round to 10% at most keeps them comfortable and makes the round easier to close. If the buyout comes to more than 10% of the round, the rest of the fee converts into shares on the usual terms, so you're never asked for cash the round can't cover.
You pay us a fixed share of monthly revenue, typically 8%, until we've received the agreed total: typically 1.4 times the fee on the reduced rate, or 1.6 times if the build was fully deferred. Payments fall in slow months and rise in good ones. At £50k of monthly revenue you'd pay £4,000 a month, which clears the £58,800 from our reduced-rate example in about 15 months. You can pay off the rest early whenever you like.
We wait longer to be paid, and the amount depends on how well you do. That's more risk for us, so it costs a little more: typically 1.4 times the fee against 1.25 times for cash on the reduced rate, and 1.6 against 1.4 when fully deferred.
At the buyout you can pay 0.1 times the fee less in cash, and that part converts into shares on the usual terms instead. On our reduced-rate example that's £48,300 in cash (1.15×) and about £5,600 of shares, roughly 0.11% of the company. Some founders prefer it when cash is tight, and it keeps us invested in how you do.
Because we're lending you our time as well as selling it. An agency sends an invoice for its full rate every month. We work for free or at a reduced rate for months, then wait a year or more for the rest, with no guarantee we'll get it. The multiplier, typically 1.25 times the fee on the reduced rate and 1.4 times when the build is fully deferred, covers three things.
Risk. Some of the startups we build for won't make it, and we'll never be paid for that work. The companies that succeed have to cover the ones that don't.
Waiting. $80k today is worth more than $80k in 18 months. Lenders charge interest for the same reason. 1.25 times over 18 months works out at about 16% a year.
It usually still costs you less. Without us, you'd need to raise that money sooner, at a lower valuation, and give away more of your company. Paying the multiple later is often cheaper than that.
Because we carry all of it. On the reduced rate you pay part of our day rate as we go, so less of our work is at risk, and for less time. That's why a fully deferred build typically settles at 1.4 times the fee in cash, against 1.25 times on the reduced rate. In our example, paying cash costs $94,000 in total on the reduced rate, including the monthly payments, against $112,000 fully deferred.
On the reduced rate, cash is cheaper, on purpose. We'd rather be paid in cash, so we make it the better deal for you. In our example, paying cash costs $70,000. Converting gives us $74,667 of shares at your round price, and those shares could be worth a lot more if you do well.
On a fully deferred build the two are close: $112,000 in cash, or $106,667 of shares. If the company is doing well enough that you'd rather keep the cash, converting may suit you, and we're glad to share in how it goes.
New investors want their money to fund growth. Keeping our share of the round to 10% at most keeps them comfortable and makes the round easier to close. If the buyout comes to more than 10% of the round, the rest of the fee converts into shares on the usual terms, so you're never asked for cash the round can't cover.
You pay us a fixed share of monthly revenue, typically 8%, until we've received the agreed total: typically 1.4 times the fee on the reduced rate, or 1.6 times if the build was fully deferred. Payments fall in slow months and rise in good ones. At $60k of monthly revenue you'd pay $4,800 a month, which clears the $78,400 from our reduced-rate example in about 16 months. You can pay off the rest early whenever you like.
We wait longer to be paid, and the amount depends on how well you do. That's more risk for us, so it costs a little more: typically 1.4 times the fee against 1.25 times for cash on the reduced rate, and 1.6 against 1.4 when fully deferred.
At the buyout you can pay 0.1 times the fee less in cash, and that part converts into shares on the usual terms instead. On our reduced-rate example that's $64,400 in cash (1.15×) and about $7,467 of shares, roughly 0.06% of the company. Some founders prefer it when cash is tight, and it keeps us invested in how you do.
Conversion
Shares and valuations
Instead of paying the fee in cash, the company issues us new shares worth that amount, plus any discount. No money changes hands. Everyone's percentage of the company shrinks slightly to make room for the new shares. This is called dilution.
If our fee converts at a funding round, we buy shares at a lower price than the new investors pay, typically 25% lower. That rewards us for backing you earlier and taking more risk. A £42k deferred fee at a 25% discount buys £56k of shares at the round price.
It's a company valuation we agree in advance, used to convert our fee when there's no round to set a price, for example at the time limit. Agreeing it early means nobody has to argue about what the company is worth at a difficult moment. A £42k deferred fee converting at a £3m cap gives us 1.4% of the company.
Pre-money is what the company is worth just before new investment arrives. Post-money is that figure plus the new cash. Raising £1m at a £4m pre-money valuation gives a £5m post-money valuation, and the new investors own £1m out of £5m, about 20%. When we say what share of the company a converted fee comes to, we measure it against the post-money figure. In our example that's about 1.1% for £56,000 of shares.
A round above a minimum size that we agree for each deal. It stops a small top-up from friends and family from starting our buyout before you've raised enough to pay it.
We're paid first, and we receive whichever is better for us: the cash buyout, typically 1.25 times the fee or 1.4 times if fully deferred, or what our shares would be worth if the fee had converted. This is standard in early-stage investment, and it means we share in a good sale the same way early investors do.
Instead of paying the fee in cash, the company issues us new shares worth that amount, plus any discount. No money changes hands. Everyone's percentage of the company shrinks slightly to make room for the new shares. This is called dilution.
If our fee converts at a funding round, we buy shares at a lower price than the new investors pay, typically 25% lower. That rewards us for backing you earlier and taking more risk. A $56k deferred fee at a 25% discount buys $74.7k of shares at the round price.
It's a company valuation we agree in advance, used to convert our fee when there's no round to set a price, for example at the time limit. Agreeing it early means nobody has to argue about what the company is worth at a difficult moment. A $56k deferred fee converting at a $8m cap gives us 0.7% of the company.
Pre-money is what the company is worth just before new investment arrives. Post-money is that figure plus the new cash. Raising $1.5m at a $12m pre-money valuation gives a $13.5m post-money valuation, and the new investors own $1.5m out of $13.5m, about 11%. When we say what share of the company a converted fee comes to, we measure it against the post-money figure. In our example that's about 0.6% for $74,667 of shares.
A round above a minimum size that we agree for each deal. It stops a small top-up from friends and family from starting our buyout before you've raised enough to pay it.
We're paid first, and we receive whichever is better for us: the cash buyout, typically 1.25 times the fee or 1.4 times if fully deferred, or what our shares would be worth if the fee had converted. This is standard in early-stage investment, and it means we share in a good sale the same way early investors do.
Raising
Investors, SEIS and ASAsInvestors and SAFEs
Investors know how deferred fees and conversion terms work, because they're similar to the SAFEs and ASAs they already use. The 10% cap on cash from a round, and the fact that you own all your code and IP, are there to reassure them.
They might, if nobody in the company understands the technology. That's why our buyout includes a proper handover: documentation, account transfers, and help hiring your first engineer. By the time investors look closely, you'll have your own technical team.
Plan for it before you raise. HMRC's guidance says money from EIS investors that goes on paying off an existing debt is unlikely to count as spent on growing the company, and the same question can come up with SEIS. Our fee is owed for work already done, so it may be treated the same way.
There are simple ways round it. Pay us from money that didn't come from SEIS or EIS investors, convert the fee into shares instead, or set the fee out in full when you apply for advance assurance. Your accountant can tell you which suits you.
Both let an investor put money in now and receive shares at a later round. The SAFE is the US standard. In the UK, SAFEs usually don't qualify for SEIS tax relief, while a well-drafted ASA does. That matters because SEIS makes your company far more attractive to UK angels.
They're UK government schemes that give individuals large tax reliefs for investing in early-stage companies. SEIS covers the earliest stage and is the more generous of the two. If your company qualifies, apply to HMRC for advance assurance before you raise, as many angels won't invest without it.
Investors know how deferred fees and conversion terms work, because they're similar to the SAFEs they already use. The 10% cap on cash from a round, and the fact that you own all your code and IP, are there to reassure them.
They might, if nobody in the company understands the technology. That's why our buyout includes a proper handover: documentation, account transfers, and help hiring your first engineer. By the time investors look closely, you'll have your own technical team.
No. A SAFE is money in for shares later. Our fee is for work already done, and you can settle it in cash. But when it converts, it works the way a SAFE does: at a discount to your next priced round, or at a cap agreed at the start if there's no round.
On a post-money SAFE, usually with a valuation cap, or in a priced round. It's the paper your other investors will expect, so there's nothing new to read.
Working together
Ownership and stopping
You do, from the first commit. Repositories, domains and accounts are in your company's name from day one.
Yes, at the end of any milestone. You only owe for the work done, and it's settled through the same triggers as the rest.
Yes. You can choose fully deferred or the reduced rate, and we can adjust the reduced rate itself. Paying more each month means a smaller buyout later.
You do, from the first commit. Repositories, domains and accounts are in your company's name from day one.
Yes, at the end of any milestone. You only owe for the work done, and it's settled through the same triggers as the rest.
Yes. You can choose fully deferred or the reduced rate, and we can adjust the reduced rate itself. Paying more each month means a smaller buyout later.
Got a question we haven’t answered?
Ask us. It’s better to sort it out now than halfway through a build.