{"id":5618,"date":"2020-05-19T21:57:40","date_gmt":"2020-05-19T21:57:40","guid":{"rendered":"https:\/\/swoopfunding.com\/ca\/?post_type=knowledge-hub&p=5618"},"modified":"2023-11-29T11:11:18","modified_gmt":"2023-11-29T11:11:18","slug":"advanced-subscription-agreement-asa","status":"publish","type":"knowledge-hub","link":"https:\/\/swoopfunding.com\/ca\/knowledge-hub\/advanced-subscription-agreement-asa\/","title":{"rendered":"Advanced Subscription Agreement (ASA)"},"content":{"rendered":"\n
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\n \n What is advanced subscription agreement? <\/a>\n <\/h5>\n <\/div>\n\n
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An Advanced Subscription Agreement (ASA) is an equity instrument where investors \u2018pre-pay\u2019 for shares in a company\u00a0\u2013\u00a0they hand over money but receive their shares when these are issued at a future funding round. ASA investors will pay less for these shares than other equity investors (i.e. they buy shares at a discount).\u00a0An Advanced Subscription Agreement is a 100% equity agreement.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Why choose advanced subscription agreement <\/a>\n <\/h5>\n <\/div>\n\n
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Seed and startup businesses often need funding very early in their lifecycle in order to get a concept off the ground, develop a commercial offering or start trading. Alternatively, at the other end of the scale, a mature business might also want to make use of this equity instrument.

If you\u2019re in either of these camps, you\u2019ve the option of raising finance through\u00a0Convertible Loan Notes<\/a>\u00a0(CLNs), which are debt instruments that can convert into shares in the future. Or you could go down the ASA route, which means you\u2019d get subscription money for shares up-front, but your company would be valued \u2013 and shares issued \u2013 at the next funding round. In other words, under an ASA an investor agrees to buy shares in your company (i.e. provides you with equity funding) but you don\u2019t issue the shares immediately.\u00a0

If you\u2019re in the startup camp, an ASA investor will typically receive a discount of 10\u201330% on the valuation applied at the next round. This is in return for taking the additional risk of early funding. The advantage to you is that you get the cash before your first qualifying funding found.\u00a0

You may have read about the pros and cons of ASAs versus CLNs, especially in the context of the\u00a0Future Fund. From the investor\u2019s standpoint, ASAs are slightly less beneficial than CLNs if your company enters liquidation, because the holders of CLNs rank higher than shareholders. Also, funds advanced under an ASA don\u2019t bear interest whereas CLNs usually do.

From your perspective, you can\u2019t pay back money invested through an ASA but you can pay back a CLN.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Have you also considered? <\/a>\n <\/h5>\n <\/div>\n\n
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These are the main types of equity finance:<\/strong>

Business angels<\/a> –\u00a0Business angels are private individuals who are prepared to put their own money into startup or early-stage businesses in exchange for a share of the company\u2019s equity (i.e. equity finance). Angels may invest on their own or as part of an angel network. Typically, they are experienced entrepreneurs and, in addition to money,\u00a0they bring\u00a0their own skills,\u00a0expertise and\u00a0contacts to the table.
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Venture capital<\/a> – Venture capital is financing given to startups\u00a0and early-stage businesses. Venture capital funds look to invest larger sums of money than\u00a0business angels<\/a>\u00a0\u2013 typically more than \u00a3250,000 \u2013 in return for an equity stake. Venture capital is most suited to high-growth businesses with long-term growth potential, i.e. those destined for sale or public listing (IPO).
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Private equity<\/a> –\u00a0Private equity is a type of\u00a0equity financing<\/a>\u00a0suitable for established private businesses. Private Equity funds give your business money in return for a large or controlling share in your business.
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Equity crowdfunding<\/a> –\u00a0Equity crowdfunding is a type of\u00a0equity finance<\/a>\u00a0whereby people (\u2018the crowd\u2019) invest in an early-stage unlisted company, in exchange for shares (equity) in that company. Individual investors thus become shareholders and stand to profit if the business does well \u2013 they might also lose some or all of their investment. Equity crowdfunding usually takes place over an online platform.

Initial public offering<\/a> (IPO).<\/p>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \n