Startups will do lots of small, frequent funding rounds
Today it’s such a drama to do a funding round – the legals take forever and cost a fortune – and you have to repeat it every 12-18 months. But legaltech has changed that, you can now do a funding round in days, for as little as 0.3% of the funds raised. So what was previously thought of as the only way to do a funding round – a moonshot every 12-18 months will be replaced by multiple small top-up rounds every few months.
Deal terms will get more founder-friendly
It wasn’t long ago that investors demanded Participating Preference shares and onerous investor consent rights. A combination of information asymmetry (VCs know what these deal provisions mean, founders don’t) and the lack of alternate funding sources (crowd, angel, SEIS) allowed that to perpetuate. Fortunately those days are almost gone, you hardly ever see Preference shares in early-stage rounds. We’re going to see this trend continue, with legaltech platforms empowering founders to lead rounds themselves, choose more balanced deal terms, and close deals rapidly with investors who agree these terms.
The decline of the Advisor
In the absence of democratised knowledge, the Advisor is king. Selling themselves as a source of knowledge, they help startups prepare pitch decks and business plans, set the valuation and define the founding round. We’ll see that role rapidly replaced by data-driven platforms that leverage data across thousands of deals and use data rather than “this is the way I usually do it” to provide a faster, better, cheaper service.
The year that ICOs go mainstream
ICOs (Initial Coin Offerings) are growing at a remarkable rate. Today each party in an ICO is independently having to figure out the jurisdiction, deal offering, anti-money-laundering checks and other core issues. But that’s about to change, ICOs are about to get standardised into 3-4 groups (security/non-security, Gibraltar/Switzerland/UK, pure/hybrid ICO) and go mainstream. You may well be investing in a hybrid ICO is 2018!
Increase in startups raising from Friends & Family / existing professional network
Much of the funding secured in crowdfunding comes from a company’s existing customers and the founders’ connections. Why create a crowdfunding campaign when you can message your network directly and close a round yourself, privately, on a legaltech platform with a lot less effort, cost and public visibility than a crowdfunding platform.