This article is for Irish startup founders who have been approved for or are considering Enterprise Ireland's Pre-Seed Start Fund (PSSF).
It's particularly relevant for early-stage startups seeking to understand their legal obligations when accepting the €100,000 PSSF investment.
Key Takeaways
The Pre-Seed Start Fund (PSSF) is a funding option from EI that offers early-stage Irish startups up to €100,000 through a Convertible Loan Note (CLN). The loan doesn’t give away equity upfront but can convert into shares later. Here’s a quick overview of what you need to know:
- Two Agreements to Sign:
- Convertible Loan Note (CLN): Covers the loan terms, interest rate (3% per annum), and when the loan can be converted into shares.
- Investment Agreement (IA): Sets the rules for using the funds, performance obligations, and reporting requirements.
- How the Funding Works:
- Available in two stages: Initial €50,000, and a second €50,000 (if conditions are met).
- CLN converts into shares at a 20% discount if you raise €250,000+ in a qualifying round.
- Key Legal Points:
- Interest accrues until the loan is repaid or converted.
- Enterprise Ireland has "Tag Along" Rights if you sell shares and rights to participate in future funding rounds up to €500,000.
- There are strict reporting obligations and trigger events that could demand immediate repayment (e.g., insolvency, breach of agreement).
- Founder Warranties:
- You must confirm that all company information is accurate and there are no hidden liabilities.
Bottom Line?
The PSSF is great for startups needing non-dilutive funding, but it comes with detailed legal obligations. Make sure you understand the fine print before signing!

1. Introduction to the Pre-Seed Start Fund
If only we had a Euro for every time a founder told us they had been approved for PSSF, but when we asked if they understood what they were agreeing to, we were met with blank stares…
If that’s you, don’t worry. You are not alone. But we have written this article to try to demystify what, from an actual process and obligation perspective, is required of you when taking the €100,000 investment for PSSF.
2. Overview

The Pre-Seed Start Fund (“PSSF”) from Enterprise Ireland (“EI”) provides early-stage startups with investment options of either €50,000 or €100,000, available in two tranches of €50,000 each.
The PSSF accepts applications at any time, without specific deadlines or application calls. This allows founders to apply when they feel ready, maximising the impact of the funding on their business.
3. The PSSF Legals

As part of the PSSF process, Enterprise Ireland doesn’t take any equity in your company in the first instance.
Instead, you enter into two agreements with EI:
(i) a ‘Convertible Loan Note’ (the “CLN”) and
(ii) an ‘Investment Agreement’; (the “IA”).
The CLN is the agreement between you and EI that actually allows for the €100,000 loan, which may later be converted into shares. It sets out the interest rate, when the loan can be turned into shares, when it can be paid back, and the conditions for repayment if requested.
The IA details that EI will invest up to €100,000 in the company in two stages. It includes the requirements the company has to meet, such as performance targets, reporting obligations, and how the funds can be used.
The CLN deals specifically with borrowing money that can be converted into shares, while the IA covers the broader relationship between your company and EI, including the investment process, performance standards, and compliance to keep the funding.
We break down each agreement in turn below.
A. PSSF - CLN Overview
The CLN says that if certain events happen in the future, the CLN will then convert into equity at that point.
Those certain events include (i) you selling your company, (ii) your company doing an IPO or (iii) taking another investment where you give out equity - also called a ‘priced round’.
In contrast, a priced round does put a value on the company, for example, if someone gave you €100k for 10% of your company, then that results in a €1m valuation - simple maths.
In the early days, it’s usually better to delay the valuation until you really know what you have in your company.
Key Terms of the CLN
Loan Note Structure
The CLN is a 3% redeemable loan, with each ‘loan note’ valued at €1.00. Your company will have to issue 100,000 loan notes to EI as part of the deal, in exchange for €100k.
That is legal jargon that means that you will have to give a piece of paper to EI that is worth €50k, twice.
Interest and Repayment
Interest accrues at 3% annually and can either be converted into shares or paid back. For example, if you take the full €100,000 and hold it for five years, EI will have accrued €15,000 in interest - which is 15k worth of additional purchase power for them on conversion day (they will be able to buy a few more shares in your company, which will dilute the founders a little bit more).
Redemption and Conversion
- Redemption - After five years, Enterprise Ireland can redeem the loan at any time, including the accrued interest.
- Conversion - If the company raises €250,000 or more in a qualifying funding round, Enterprise Ireland can convert the loan and interest into shares, at a 20% discount on the lowest subscription price.
Trigger Events
Enterprise Ireland can demand immediate repayment if any of the following occur:
- The company fails to meet any of its financial obligations.
- Insolvency or liquidation occurs.
- The company is in breach of its obligations under the Loan Note Instrument or Investment Agreement.
- The company lists its shares on a public stock exchange.
Obligations and Notices
- The company must provide EI with 30 days' notice of any sale or share transfer.
- Any such event could trigger full repayment of the loan or a demand for 10% of the company’s voting share capital.
B. IA Overview
The Investment Agreement outlines the terms that the startup must adhere to in order to receive PSSF funding. It is signed alongside the CLN and sets expectations for both the company and EI.
Key Terms of the IA
First Stage (Pre-Completion)
Your Company must provide:
- A Tax Clearance Certificate.
- Matching funds evidence (e.g., SAFE agreement, loan agreement, etc.).
- Board resolutions approving the transaction.
First Stage Completion
- Board meeting confirming the issuance of the first €50,000 loan notes.
- Delivery of a Company Secretary Certificate and a Solicitor’s Certificate.
Second Stage (Within 12 Months)
- This is subject to EI’s funding availability and the company's progress.
- You must provide updated financials and proof of matching funds.
Post-Investment Obligations
After the investment, you must:
- Provide progress reports within 12 months of the first-stage completion.
- Deliver management accounts within three months of the end of each financial quarter.
- Submit annual accounts within six months of the end of each financial year.
Share Transfer Restrictions
Founders should note that:
- They cannot transfer or issue new shares without ensuring the new shareholders agree and sign up to the terms of the IA.
- No shares can be sold without EI’s consent, and in the event of a sale, EI has a "Tag Along" right, which means you need to arrange for the buyer of your shares to buy EI’s shares too!
Future Investment
EI has the right to participate in any future investment rounds up to €500,000, provided that it is a qualifying funding round (raising a minimum of €250,000).
4. Warranties Provided by the Company

Finally, EI will make you provide some warranties about your company. Warranties are promises made by the company to assure EI that everything is in order. The warranties last until the second anniversary of the first-stage completion. Key warranties include:
Information Accuracy
- All information shared with EI is accurate.
- Business plans are honestly prepared.
Liabilities and Claims
- No outstanding liabilities (except as disclosed).
- No shareholder has made claims against the company.
Share Capital
- Shareholding information is correct.
- No undisclosed convertible debt or share options.
Company Authority
- Company is legally registered and compliant.
- Entering into this agreement does not conflict with existing rules or obligations.
How can Open Forest Help?
After you apply for PSSF funding, you will go through a process with a Development Advisor and if you are successful, you are required to appoint legal advisors to work through the legal process with Enterprise Ireland’s solicitors.
Many law firms can charge upward of €1,500 plus 23% VAT and that is from some of the large law firms. The reason they offer it so cheap is because they offer it that low as a ‘loss leader’ - in other words, they are hoping to take an arm and a leg later.
We do that by relying on technology for as many of our processes as we can, and we avoid hiring legal staff and renting fancy legal offices.
We are a lean ComplianceTech company that puts founders first.
If you are in the late stages of PSSF approval or have just been approved, drop us an email on info@openforest.co and we will have the cash in your bank within 4 weeks of approval.

Stuart Connolly is a corporate barrister in Ireland and the UK since 2012.
He spent over a decade at Ireland's top law firms including Arthur Cox & William Fry.