Startup Legal Checklist Before Raising Capital

Why Legal Preparation Matters Before a Raise

Investors conduct legal diligence as part of any financing round, and issues discovered late in the process can delay closing, reduce valuation, or, in some cases, cause an investor to walk away. Addressing common legal gaps before a raise begins puts founders in a stronger negotiating position.

Entity Structure

Many venture investors expect a Delaware C-Corp structure. Companies formed as an LLC or in another state sometimes need to convert or reincorporate before raising, and doing so early avoids adding this step to an already time-sensitive closing process.

Founder Agreements and Equity

A clear founder agreement covering equity splits, vesting, and departure provisions is one of the first things investors review. Gaps here — such as founders holding fully vested equity with no vesting schedule — are a common diligence flag.

IP Assignment

Investors expect the company, not individual founders or contractors, to own the intellectual property the business relies on. Confirming that all founders, employees, and contractors have signed appropriate IP assignment agreements is a frequent and fixable gap.

Cap Table Accuracy

An accurate, current cap table reflecting all outstanding equity, options, and convertible instruments is essential for investors to evaluate ownership and dilution. Cleaning up cap table errors before a raise avoids surprises during term sheet negotiations.

Contracts and Compliance

Reviewing key customer, vendor, and employment agreements, along with any applicable regulatory compliance obligations, helps ensure there are no unaddressed liabilities that could concern a prospective investor.

Working With Anthony Girand, Esq.

Anthony Girand, Esq. is a JD/MBA and Maryland attorney whose practice includes immigration, tax controversy, federal litigation, startup law, and regulatory compliance. He brings a business-minded legal perspective to matters involving federal agencies, founders, professionals, companies, and individuals facing consequential legal decisions.

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