Ready to raise? What investors find when they look under the bonnet – and how to make sure it isn’t a problem
08/06/2026
You have built something worth backing. An investor is interested. The term sheet is being discussed. This is the moment founders dream of – and yet it is also the moment when poor legal preparation, often accumulated over months or years, can threaten to derail or undervalue the deal.
In advising founders across hundreds of equity funding rounds, from Seed through to Series A and beyond, the same issues come up again and again. The good news is that most of them are entirely preventable. The bad news is that they are easily overlooked – often because founders have been understandably focused on building the business rather than building its legal infrastructure.
I have seen all of these outcomes – rounds delayed by months, transactions repriced on the eve of completion, and in a handful of cases, deals that did not close at all – in situations where the underlying business was sound and the investor was willing. The issue, in each case, was legal preparation that had been left too late.
This article sets out the key areas to address before you start talking to investors, so that when due diligence begins, your company inspires confidence rather than questions.
Get the legal foundations right before you start raising
Before you approach a single investor, your company’s legal architecture needs to be in order. This means having a properly drafted shareholders’ agreement in place – one that governs the relationship between founders, protects the company’s future, and anticipates the provisions investors will expect to see or introduce at the investment round. It means ensuring that all intellectual property created by the founders is legally owned by the company through properly executed IP assignments. And it means having clear founder service agreements that define roles, obligations, and – critically – vesting arrangements that will satisfy future investors that key people are tied into the business.
These documents are not just legal formalities. They are the foundation on which every subsequent funding round will be built. Getting them wrong, or not having them at all, creates problems that are expensive and time-consuming to fix in the middle of a live transaction.
Know what investors will look for
Investors will carry out due diligence. The scope and depth will vary, but certain areas are scrutinised in almost every transaction.
Intellectual property is often the key asset in a technology business, and investors will want to understand clearly who owns it and how it is protected. If founders developed IP before the company was incorporated, or if contractors contributed to it, ownership may not sit where you think it does. This needs to be resolved before, not during, due diligence.
Your statutory books – the company’s share register, register of directors, and related records – must be accurate and up to date. So must your Companies House filings: annual accounts, confirmation statements, and returns on allotment of shares. Investors treat good corporate housekeeping as an indicator of how well a business is managed. Gaps and discrepancies raise questions.
Your cap table should be a clear, accurate record of who owns what, reflecting every share allotment since incorporation. If it does not match the statutory position, it needs to be corrected before anyone looks at it.
Understand the process before you are in it
A term sheet sets out the key terms on which an investor is willing to invest. It is not a binding contract on investment terms, but in practice it is close to one – once signed, it is very difficult to renegotiate. Make sure you understand every provision before you sign, particularly those relating to valuation, governance, information rights, and exit arrangements. And be aware that certain terms are legally binding from the outset, including confidentiality, exclusivity, and cost provisions.
If you have existing shareholders, you need to understand what consents or approvals they hold that will be required to close a new round. Pre-emption rights in your articles of association or shareholders’ agreement can significantly affect the process and timetable if not managed carefully.
Investment processes almost always take longer than anticipated. Your investor has internal approvals to obtain. Existing shareholders may need time to respond. Understand these realities early, plan for them, and agree a clear timetable in the term sheet.
Get the right advisers – and get them early
The right legal adviser at this stage is not a generalist. It is someone who has sat across the table from investors hundreds of times, understands what is standard and what is not, and can guide you through the process efficiently while protecting your interests at every step.
The cost of good legal advice at this stage is modest compared to the cost of a deal that completes on unfavourable terms – or does not complete at all. Getting a specialist involved early, before you are deep into negotiations, is invariably the better approach.
Launch by Temple Bright was designed with exactly this need in mind. The Launch Founder Suite gives early-stage technology founders a properly drafted shareholders’ agreement, IP assignments, founder service agreements, and initial share issue – all four documents, created and tailored personally by me – for a fixed fee of £1,995 plus VAT. To find out more or arrange an initial conversation, contact me directly at [email protected] or on 07304 074242.
This article is not legal advice, which it may be sensible to obtain before you take any decisions or actions in the areas covered. Please do contact me if you would like an initial discussion of your situation.
