The legal groundwork investors expect to see before a term sheet — incorporation, IP assignments, cap table hygiene.
Legal issues rarely kill fundraises loudly — they kill them by delaying diligence past the investor's attention span. Get this list done before you start pitching.
US venture investors expect Delaware C-corps. LLC or foreign entities usually need to convert before a term sheet, which adds weeks and legal cost. Do this at formation if you plan to raise venture.
Every founder on a 4-year vest with a 1-year cliff, documented in stock purchase agreements. 83(b) elections filed within 30 days of grant. Missing 83(b)s create tax problems that follow founders for years.
Every founder, contractor, and early employee must have signed an IP assignment to the company. Missing assignments — especially from contractors and student collaborators — kill rounds in diligence.
Carta, Pulley, or LTSE Equity. A spreadsheet cap table triggers questions about what else is amateur. Real tools also handle 409A valuations, option grants, and future round modeling.
Required before granting options. $500–$3000 from a specialty firm; free with most cap table tools. Skipping it exposes early employees to punitive tax treatment.
Board-approved stock option plan with a defined pool size, standard 4-year vest, 1-year cliff. Have this ready before hiring anyone, and know how to draw down against it cleanly.
Standard master service agreement or terms of service. Vendor contracts reviewed for change-of-control clauses. Anything with a personal guarantee or unusual liability should be flagged and disclosed.
Every prior SAFE or convertible note with clean copies filed. Model the conversion of every note into every possible next round — surprise conversions are one of the most common diligence blowups.
Foreign qualification in states where you have employees. Payroll tax filings up to date. Sales tax collected where required. All boring, all necessary.
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