While investors scrutinize your business, it's equally important for you, as an entrepreneur, to ask the right legal questions before embarking on this journey. These questions not only ensure a smoother process but also build confidence among potential backers.
Legal Structure: Is your startup structured correctly? Federal or provincial incorporation, director residency requirements – understanding your legal foundation is essential.
Intellectual Property (IP): Who owns your startup's IP? Ensure all IP is assigned to the company, and be wary of any potential claims, especially from co-founders or employees. Have a robust IP strategy in place.
Equity Documentation: Is your equity issuance well-documented? Founder shares, board consents, and avoiding "promised equity" are crucial aspects to consider.
Pro Forma Cap Table: Have you prepared a pro forma cap table? This table should reflect ownership changes post-financing and consider conversions triggered by SAFEs or convertible notes.
Employment Compliance: Are you in compliance with employment laws? Determine the employment status of your workers, clearly define their relationships through agreements, and ensure legal adherence.
Securities Law: Have you complied with securities laws? Ensure that past equity issuances met valid securities law exemptions, and have the necessary documentation to satisfy potential investors.
Asking these legal questions is your proactive step toward a successful fundraising journey, minimizing risks, and ensuring a strong legal foundation for your startup's growth.
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