Driving efficiency for early-stage investments with Clarilis

A comprehensive, automated solution based on the BVCA model forms.

Shifts in the deal landscape

The early-stage investment market in the UK has changed significantly in the last decade. Ten years ago, most Series A funding rounds would involve one, maybe two investors. Today, it’s common for a company to attract a wide range of backers, with more capital than ever before coming from the US and other foreign parties. To add to the complexity, investors will now often invest at different times. This combination of factors places extra demands on lawyers who want to facilitate a smooth, swift, and successful transaction for their clients. And, of course, all of this needs to be delivered at a highly competitive price point.

To meet this challenge, firms need to adapt their working processes, and where appropriate, deploy efficiency-driving technology.

In today’s volatile dealmaking environment, getting signatures on documents faster is a key goal for everyone involved in early-stage investments. For the fund, this is so they can deploy capital and move on to the next deal. For the company, they want to minimise the time, cost and distraction inflicted by the investment process. For the law firm, the driver is to protect their (likely limited) profit margin while also impressing the client sufficiently to win favour in the hope of future work. Achieving these goals relies on closing the deal as efficiently as possible, and to do this law firms need to eliminate any pockets of inefficiency in their delivery of the deal documents.

Clear, fair, and comprehensive documentation is critical to the smooth running of a deal both pre and post signature. Although producing these documents is one of the more routine aspects of a lawyer’s role, the quality and accuracy of these agreements is paramount.

A new industry standard

In relation to drafting efficiency, standardisation is key – establish a market position in relation to key provisions and then negotiate departures from that standard, rather than negotiating each clause line by line.

The British Private Equity & Venture Capital Association (“BVCA”) model form documents for early-stage investments were initially introduced more than 15 years ago, providing a standardised set of legal documents for venture capital investments in the UK. They aimed to streamline the investment process, reduce legal costs, and promote best practices within the industry. However, with changes in the deal-making environment, the BVCA’s documents had drifted away from market practice and lawyers were no longer using them due to the volume of reworking required.

ln 2023, the BVCA revised and relaunched its model documents, providing lawyers once again with high-quality, industry-approved templates that reflect the nuances of today’s early-stage investment market. For example, the new model forms now include EIS and VCT provisions, some of the more contentious negotiation points have been removed (e.g., founder warranties) and by giving more prominence to ‘major investors’, deal terms are more aligned with the US investor market.

Not only were the BVCA documents updated they were also streamlined, eliminating a number of contentious elements and introducing common structures (such as EIS/VCT waterfalls). The new model forms reduce the costs incurred and time taken to negotiate a final form and to administer the relationship between the investors and founders going forward. The omission of founder warranties has been welcomed by founding teams in the UK (although it is common practice to reinstate these).

The work of the BVCA and its contributing law firms has been much appreciated by the market and the use of the model forms since their relaunch has been encouraging.

Adopting the BVCA model forms significantly reduces lawyer drafting time. However, these deals still have a huge number of variable elements in terms of their structure, all of which need to be reflected in the drafting. To take drafting efficiency to the next level, Clarilis has taken that standard content and deeply automated it.

Having already created automated solutions based on the CVCA and NVCA documents in Canada and the US, the updated BVCA model forms have provided an opportunity for Clarilis to replicate this success by introducing an automated early-stage investment suite for the UK market. Clarilis’ Early-Stage Investment Suite includes deeply automated versions of the full range of documents lawyers require when documenting early-stage investments. This includes automations of all the BVCA’s core documents – articles of association, subscription agreement, shareholders’ agreement, registration rights agreement, and the disclosure and confidentiality letters. Additionally, to provide a comprehensive suite, Clarilis partnered with one of its longstanding customers, Addleshaw Goddard LLP, to create additional market-standard versions of over 30 common ancillary documents and forms (term sheets, warrants, minutes, resolutions, appointments and filings etc.), and additional drafting options commonly seen in the market for the core BVCA documents.

Amplifying impact

In conclusion, with law firms facing growing pressure to expedite early-stage investment transactions, the need to optimise drafting practices has never been greater. Streamlining through standardisation enhances efficiency, but its impact is significantly magnified when paired with automation. While standardisation alone saves corporate lawyers valuable time, combining it with automation unlocks its full potential.

Learn how law firms can draft an entire suite of early-stage investment documents in under an hour with Clarilis’ early-stage Investment Suite.

Read more here: Driving efficiency for early-stage investments