What is an Advanced Subscription Agreement (or an ASA)?

• An Advanced Subscription Agreement (“ASA”) is in essence the UK's answer to a US SAFE.

  • YCombinator have a great explantion of SAFEs, what they do and a free template here.

• An ASA allows investors to put cash into a business now which will then convert into shares at the next funding round.

• The valuation of the company (and the shares) will be determined at the future funding round.

• Investors are usually given a discount to the share valuation in the future round

  • N.B. they don’t have to be.

• There is a long stop for the funding round at which point the cash invested into the business under the ASA has to convert into shares at an agreed valuation.

• This is one of the key differences between an ASA and a convertible loan agreement ("CLA"), which allows an ASA to qualify for the UK Enterprise Investment Scheme (EIS) / Seed Enterprise Investment Scheme (SEIS) (where a CLA doesn't).

  • For a quick word on CLAs see our blog post here.

• With a convertible loan the lender can both (1) get their money back if there is no qualifying financing round, and (2) charge interest on the loan – i.e. it operates like a debt rather than an equity investment.

• Advantages of ASA

  • Allows you to avoid doing a priced round which:

    • saves time (requires only one document);

    • is cheaper (less professional advice needed); and

    • potentially allows you to get more cash in the door at a higher valuation down the line.

• N.B. the long stop to qualify for EIS/SEIS is 6 months.

  • You will therefore need to include a price per share at which the ASA converts if you don’t do a further priced round within that timeframe.