The Rolling Close

By Seed Rounds

Unlike Series A Rounds, most seed rounds of financing don’t have all investors fund their investment on the same date. Sometimes it’s a matter of logistics for investors, but mostly it’s because the startup is continuously identifying and pitching potential angel investors to join in the seed round.

The startup can’t afford to wait to close their seed round until it receives commitments from all investors and/or the full amount of the round. Thus, startups will institute a rolling close structure which allows the startup to hold an “initial closing” with one or more investors and then hold “additional closings” with subsequent investors.

There is typically a limit on how long a startup can hold such additional closings. I typically see these in the 60-90 day range after the initial closing, but startups can attempt to push for 180 days.

It’s definitely a company-favorable term to have a longer time frame to close the round. The investor pushback on longer rolling closing time frames is that it allows potential investors to hedge and/or get the same deal long after the initial close. A longer rolling close deadline could also give potential investors who are sitting on the fence reason to believe they could “wait and see” whether they want to invest.


ACCELERATE YOUR STARTUP LAW KNOWLEDGE!

Startup Law doesn’t have to be a confusing maze. The practical knowledge in "Acceleration: What All Entrepreneurs Must Know About Startup Law" will help you make the smart decisions to protect your startup and its future. Available in ebook and hardcover.

Buy the Book on Amazon
startup-lawyer-acceleration-cover
You Might Also Like:  Why Your Startup Company Needs to Keep the Number of its Investors Low