Understanding Advanced Subscription Agreements (ASAs) for Beginner Angel Investors in the UK

Investing in startups can be exciting but risky at times when not equipped with the right knowledge and skill set. To de-risk the possibility of losing your money when angel investing, it is crucial to be familiar with the financial instruments involved when investing. Traditionally angel investors invest in a startup and receive equity in return, however, there are other instruments angel investors can use to make their investment. One such instrument that is gaining popularity, especially in the UK, is the Advanced Subscription Agreement (ASA). In this article, we’ll break down what ASA is, why angel investors might choose it, how founders benefit from it, and what investors need to be cautious of when using this instrument.

1. What is an ASA?

ASAs serve as a form of convertible instrument, providing investors with the right to subscribe to shares in a future funding round, typically the next equity financing event. Similar to the Safe Agreement for Future Equity (SAFE note), popularised by the startup accelerator Y-Combinator in the US.

One big advantage ASAs have for founders and investors is that, unlike traditional equity investments, ASAs postpone the valuation discussion until a later round. This allows founders and investors to focus on building the business in its early stages without spending significant time negotiating the company’s value. Investors also often get a discount on the price per share they invest at as an incentive for investing before agreeing on a valuation, i.e. 10% discount on the next priced funding round.

2. Why Would Angel Investors Use ASA?

There are several reasons why angel investors would use ASAs. 

  • ASAs are known for their simplicity, making them a time-efficient choice since you don’t have to immediately set a valuation. Investors can quickly inject capital into the company.
  • ASAs often include a discount on the share price at the subsequent equity round. This means that investors will receive more shares in the future compared to their initial investment.  
  • ASAs can also minimise dilutions for investors since the valuation discussion is delayed.

3. Why Would Founders Use ASA?

There are several reasons why founders would use ASAs. 

  • ASAs for founders offer a speedy way to raise capital without extensive negotiations over the company’s valuation. This is particularly advantageous in the early stages when the business model and valuation might need to be clarified.
  • Founders can raise capital without having to fill the funding round. Usually, when raising equity the founder will have to fill the round to continue operations, allowing for less flexibility for the founder. 
  • ASAs provide flexibility in structuring deals. Founders can focus on building their product or service without the immediate pressure of determining the startup’s valuation, allowing them to attract investors more easily.
  • The simplicity of ASAs can also lead to reduced legal costs compared to negotiating traditional equity investments, making it an attractive option for startups with limited resources.

To summarise for the founder there are very few downsides to use ASAs. But what about the angel investor? are there any downsides for investors? 

4. What Do Angel Investors Need to Be Aware of When Investing in ASAs?

One significant risk angel investors need to be aware of is that if angel investors invest in an ASA and a startup collapses before the investor’s shares convert, there are no downside protections for the investor such as claiming SEIS/ EIS tax relief. It is much harder for investors to get the money out of the startup compared to a priced round. 

The main drawback to remember with ASAs is the period between when you invest in an ASA and before the ASA converts into shares is very uncertain and there is almost no protection for the investor during this period.  This could result in an investment is a startup that fails to close its funding round and ultimately doesn’t return your funds. However, in a priced round you are usually asked to transfer funds when the startup has enough funds confirmed to close its round.

Therefore before investing in an ASA, make sure you are aware of the downside you can face as an investor. 


ASAs offer a streamlined and flexible approach to early-stage fundraising, benefiting both angel investors and founders. However, careful consideration of the potential risks involving ASAs is crucial for investors to make informed decisions and maximise the success of their startup.

Posted in

Leave a Comment