Know the Rules

Know the rules before you raise: Equity fundraising & the FCA

Our guide to ensure start-up and scale-ups don’t break the law when fundraising


You’ve launched your start-up and you’ve got a proven product, a great culture and a growing list of happy customers …but, you need a cash injection to get to the next level. So, you write your business plan, tune a great pitch and are ready to fundraise.

You’ve got a crowd of supporters or a large customer base, you decide you don’t need to sign up to a crowdfunding site, and plan to appeal for funds from your network on social media or by email.




Equity investment is a highly regulated industry due to the risks involved. If you’re not working with an FCA-regulated third-party, you need to be 100% clear on what you can and cannot do.

How much you are planning to raise and from whom determines what documentation and sign-off you need.


How much equity finance are you raising?


You are raising up to €8m within a 12-month period

In order to market your financial promotion to non-professional investors (see below), you need sign-off from an individual authorised by the Financial Conduct Authority (FCA) to ensure you are ‘investment ready’. It is the job of this person to review your documentation and ensure that everything is clearly and fairly presented. This often involves substantive statements being checked against third-party evidence.


If you choose to work with a corporate finance firm, they can usually help you through this process by not only providing sign-off, but also by working with you to ensure that the deal is appealing in terms of structure and valuation.


Be sure to build in enough time in your planning to accommodate sign-off. Checks are comprehensive and therefore take time – typically around two weeks.


You are raising more than €8m within a 12-month period

For larger raises, you need a Prospectus in order to market your investment opportunity to non-professional investors. A prospectus is a formal document about your business and investment opportunity; it is the same type you would use if you were planning to list on a stock exchange, which gives you a sense of the scale.


Compared with a financial promotion sign off, a prospectus is more time-consuming and significantly more expensive to produce.


 Who are you marketing your equity investment opportunity to?

The ‘who’ is an important question. If you are marketing your deal to professional accredited investors like venture capital funds and private equity firms, you do not need a prospectus or sign off on your financial promotion. If you are marketing to non-professionals, you do. All non-professionals must self-certify their investor status.


What is self-certification?

In order to invest, non-professional investors must sign a document that confirms which type of investor they are. If you are marketing a financial promotional directly to non-professionals, you are responsible for ensuring they self-certify and managing those records. This is where using an off-the-shelf fundraising platform like Envestry for Scale-ups can really help. This process is in-built, you don’t have to worry about managing and storing statements from every single potential investor.


What is a restricted investor?

A restricted investor is a regular individual who has had no formal training and little to no experience in equity investments. To protect these individuals, regulation requires that they ‘self-certify’ and, by signing a statement, ensure that they have and will not ‘invest more than 10% of their net assets in no-readily realisable securities,’ ie your investment opportunity.


What is a sophisticated investor?

Sophisticated investors have some experience in investment either via participation in a network or a syndicate of business angels, by making investments themselves (within the past 12 months), working in the private equity sector or being the director of a company with a turnover of at least £1m.


What is a high net worth investor?

A high net worth investor self-certifies that they have an annual income of £100,000 or that they have held £250,000 or more of net assets in the financial year immediately preceding the date on which they self-certify. Net assets do not include property which is a primary residence and benefits which are payable on death or retirement.


Got it? It can be confusing. If you would like advice on regulation or help with putting together your investment opportunity, click here.