Addressing Legal Considerations in Pitching

𝗖𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁 𝗳𝗼𝗿 𝗣𝗶𝘁𝗰𝗵 𝗗𝗲𝗰𝗸 𝗟𝗲𝗴𝗮𝗹 𝗥𝗲𝘃𝗶𝗲𝘄 As an emerging fund lawyer who routinely gets asked to review pitch decks for clients, my standard practice is to run my review against this checklist. 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 𝗳𝗼𝗿 𝗘𝗥𝗔𝘀 First, while venture fund advisers are exempt from registration under the Advisers Act, all investment advisers (including VCs & other ERAs) remain subject to Section 206, which prohibits fraudulent or deceptive practices (the "anti-fraud provisions"). Recent SEC enforcement actions highlight the agency's ability to bring actions against ERAs for marketing practices that mislead investors: • For example, a 2022 SEC settlement against a $1B+ alumni-focused venture fund shows these risks: The VC presented its offering as a 2 & 20 vehicle in its marketing materials, but the sub docs required the management fee (20%) to be paid up front, violating anti-fraud principles. 𝟱 𝗞𝗲𝘆 𝗠𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 𝗥𝘂𝗹𝗲𝘀 𝗳𝗼𝗿 𝗩𝗖 𝗣𝗶𝘁𝗰𝗵 𝗗𝗲𝗰𝗸𝘀 1️⃣ 𝗡𝗼 𝗙𝗮𝗹𝘀𝗲 𝗼𝗿 𝗠𝗶𝘀𝗹𝗲𝗮𝗱𝗶𝗻𝗴 𝗦𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁𝘀 This is the golden rule: Don't mislead your investors. Everything else flows from this rule. • Avoid promises of guaranteed returns / inaccurate metrics • Confirm all claims are accurate & substantiated 🔹 Example: “We are a $1B fund” (but $0 capital commits) 2️⃣ 𝗙𝗮𝗶𝗿 & 𝗕𝗮𝗹𝗮𝗻𝗰𝗲 𝗣𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 • Don't cherry-pick successes—context matters • Show realized & unrealized returns • Track record disclosures must reflect the actual investment strategy (e.g., late stage secondary SPV deal ≠ direct seed VC investment) 🔹 Example: A 2023 SEC case fined a VC firm for claiming “top quartile VC returns” without referencing vintage or benchmark 3️⃣ 𝗦𝘂𝗯𝘀𝘁𝗮𝗻𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗖𝗹𝗮𝗶𝗺𝘀 • Every material claim in a deck should be backed by evidence, even if it's intuitive • Keep an audit trail of past versions of the deck and supporting data 🔹 Example: "Only 2% of funding goes to women, but they substantially outperform the market"—back that claim up, even if it makes sense/is true! 4️⃣ 𝗖𝗹𝗲𝗮𝗿 & 𝗟𝗲𝗴𝗶𝗯𝗹𝗲 𝗗𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲𝘀 • Disclaimers must be prominent and readable (≥10pt font at a minimum) • Confirm risk factors are clearly outlined—balanced disclosures are required for forward-looking statements 🔹 Example: Don't rely on your disclaimer as the sole disclosure item 5️⃣ 𝗖𝗼𝗻𝗳𝗹𝗶𝗰𝘁𝘀 𝗼𝗳 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 & 𝗘𝗻𝗱𝗼𝗿𝘀𝗲𝗺𝗲𝗻𝘁𝘀 • Disclose conflicts related to performance fees, cross-fund investments, or related parties • If using third-party endorsements, disclose any compensation or relationship 🔹 Example: “Founder X is an LP in the fund”—and disclose any economic interests tied to the endorsement 𝗥𝗲𝗺𝗲𝗺𝗯𝗲𝗿: Compliance with anti-fraud provisions isn't just about following rules—it's about building trust and giving fair treatment to your investors

Fundraising isn't just about pitch decks and high valuations; it's also about navigating the intricate legal landscape that can make or break a deal. Recent experiences with legal counsel (positive ones, of course) have underscored how the 'build in public' narrative often overlooks the less glamorous, ‘un-social media worthy’, yet critical, aspects of fundraising. → Terms that seem small but dilute your ownership. For reference, founders typically face dilution of 10-25% during seed rounds and 15-25% in Series A. Over multiple funding rounds, this can significantly reduce a founder's stake, potentially leading to loss of control. → Legal structures that determine exit flexibility. That means by misunderstanding term sheet provisions can later lead to unfavourable terms, restricting future exit opportunities, impacting long-term strategic goals. → Missed clauses that come back to bite years later. Ambiguities in term sheets or founder agreements can result in disputes, misaligned incentives, and even jeopardise the startup's survival . — I’ve see too many founders, in industry, focus on raising the biggest round possible, but if you don’t understand the legal side, you’re setting yourself up for headaches down the road. Just over here bringing to the forefront the less shiny, but important, side of fundraising, one post at a time.

𝐓𝐡𝐞 𝐋𝐞𝐠𝐚𝐥 𝐒𝐢𝐝𝐞 𝐨𝐟 ‘𝐈’𝐦 𝐎𝐮𝐭’: 𝐖𝐡𝐚𝐭 𝐇𝐚𝐩𝐩𝐞𝐧𝐬 𝐀𝐟𝐭𝐞𝐫 𝐑𝐞𝐣𝐞𝐜𝐭𝐢𝐨𝐧 Every founder worries about getting a ‘yes.’ But what about when you get a ‘no’? Investors pass on deals all the time, but they don’t forget great ideas. What stops them from taking what they learned in your pitch and running with it? Most investors won’t sign NDAs, so how do you legally protect your idea, brand, and strategy after you walk out of that room? 𝐇𝐨𝐰 𝐭𝐨 𝐏𝐫𝐨𝐭𝐞𝐜𝐭 𝐘𝐨𝐮𝐫 𝐒𝐭𝐚𝐫𝐭𝐮𝐩 𝐏𝐨𝐬𝐭-𝐏𝐢𝐭𝐜𝐡 1. Trademarks Before Talking – Your startup name, logo, and tagline should be locked in before pitching. An investor can back another founder, but they can’t legally use your brand if you’ve protected it. 2. Patents & Provisional Filings – If your business relies on a unique product or technology, file for a provisional patent before pitching. Even if an investor passes, they legally can’t use your innovation. 3. Keep Trade Secrets Secure – Not everything needs to be shared. Leave out proprietary details, formulas, or algorithms unless absolutely necessary. Investors need to know the impact, not every technical detail. 4. Investor Due Diligence – Not all investors are ethical. Before pitching, research their past deals, have they been involved in disputes over stolen ideas? If yes, think twice. 5. Strategic Disclosures – Structure your pitch so that key competitive advantages remain vague until further discussions. Tease the ‘how’ but protect the details. 6. Follow-Up Communication – Keep a record of emails, pitch decks, and discussions with investors. A strong paper trail helps if you ever need to prove your idea was stolen. What to Do If You Suspect Your Idea Was Used Check for IP Violations – Is a similar product or concept appearing under their portfolio? Look at trademarks, patents, and branding to spot overlaps. Gather Evidence – Save every email, pitch deck, and message exchanged. A timestamped document proving prior ownership is your strongest defense Compare Details – Is their version identical to your business model, branding, or tech? Small similarities might be coincidence, but an exact replication is worth investigating. Engage a Lawyer – If you have proof of misappropriation, a lawyer can help assess whether legal action is viable or if strategic pressure is the better move. Leverage Public Narrative – If your idea was stolen but legal action isn’t feasible, telling your story strategically through startup communities, media, or networking can make it harder for them to benefit from unethical behavior. The Takeaway? Protect Your Startup Before the Pitch, Not After. Rejection doesn’t mean your idea is safe. The best way to defend your business is to ensure it’s legally untouchable, before you ever step into the room. #StartupLaw #InvestorPitches #Trademarks #Patents #BusinessProtection #Entrepreneurship #Fundraising #LegalForStartups

Startups – You’ve got the pitch and a polished presentation, But is your startup investor-friendly-> legally? Startups looking for investors focus on their pitch, product, and market fit. But seasoned investors dig deeper - way deeper. Investors are not just betting on your idea, they’re scrutinizing every detail. Before writing you a cheque,  They’ll look for “Legal” red flags. So if you want to impress investors Start with a legally airtight foundation. Here’s a checklist of the Legal Documents that build investor confidence: 1. Foundational Documents → Articles of Incorporation → Shareholders Agreement → Founders Agreement 2. Intellectual Property (IP) Ownership → IP Registrations → Licensing Agreements 3. Contractual Obligations → Supplier Agreements → Employment Agreements 4. Financial Liabilities  → Debt Obligations → Tax Compliance 5. Regulatory Compliance  → Licenses and Permits → Compliance Records Bonus tip: Where You Incorporate Matters! Jurisdiction impacts your taxes, funding potential, and investor confidence. -> U.S. vs. Canada: Opt for North America for access to robust markets and investors. -> Dubai, Qatar, and Saudi Arabia: Tax-friendly hubs perfect for startups targeting global expansion. -> Other Regions: Need to consider how regulations and costs align with your goals. A strong legal foundation not only attracts funding but builds trust in your leadership. -------------- Reshare ♻ if this resonates with you. And follow me for more posts like this.

𝗛𝗶𝗱𝗱𝗲𝗻 𝗟𝗲𝗴𝗮𝗹 𝗥𝗲𝗱 𝗙𝗹𝗮𝗴𝘀 𝗶𝗻 𝗦𝘁𝗮𝗿𝘁𝘂𝗽𝘀—𝗛𝗼𝘄 𝘁𝗼 𝗦𝗽𝗼𝘁 𝗧𝗵𝗲𝗺 𝗘𝗮𝗿𝗹𝘆 A strong pitch doesn’t always equal a strong business. Many startups carry hidden legal risks that can derail even the brightest ideas. For angel investors, spotting these red flags early is critical to protecting your investment. → Incomplete Founder Agreements Misaligned expectations or undefined roles can lead to conflicts down the road. Example: A startup collapses when co-founders argue over decision-making authority and ownership stakes. → Weak Intellectual Property (IP) Protections Verify that patents, trademarks, and copyrights are properly registered and assigned to the company, not the founder. Example: A competitor copies an unprotected product, leading to costly legal battles and loss of market share. → Unclear Ownership Structures Look for cap table irregularities, such as undisclosed investors or disputes over equity. Example: An investor backs out upon discovering hidden equity claims from a past employee. → Pending or Past Legal Disputes Lawsuits or regulatory issues can be major distractions and financial drains. Example: A startup’s growth stalls due to an ongoing patent infringement lawsuit consuming resources. → Non-Compliance with Regulations Check that the startup complies with industry standards and local laws to avoid penalties later. Example: A health-tech startup faces hefty fines for failing to meet data privacy regulations. Don’t just evaluate the pitch—evaluate the foundation. As someone who has helped investors spot these red flags early, I can help you make informed investment decisions. How do you uncover legal risks in startups? Let’s connect to discuss safeguarding your investments. #StartupInvesting #AngelInvestors #LinkedIn

In Sprint 7 of Venture Institute Cohort 4, we had the pleasure of being mentored by Hans Kim, a General Counsel to Startups & VC Funds and notably, a co-author along with Adeo Ressi of what is now the ubiquitous Y Combinator Simple Agreement for Future Equity (SAFE). Hans broke down essential legal considerations for startups raising venture capital, including legal due diligence (incorporation, stock issuances, IP, contracts, litigation, and debt), cap tables, and investment structures like common stock, preferred stock, SAFEs, convertible notes, and debt financing. Key distinctions include pre-money vs. post-money SAFEs, the impact on ownership dilution, and critical terms found inside letters (pro rata rights, board seats, and protective provisions). He also detailed term sheets—valuation, liquidation preferences, and governance structures—alongside the core preferred stock agreements that shape investor rights and company control. For founders navigating fundraising, understanding these elements is crucial to structuring deals effectively and protecting long-term ownership. #VentureCapital #Founders #Startups #VIC4

Don’t mess up your fundraising by making common legal mistakes (narrative post) Imagine this: You’ve just nailed your startup pitch. Investors are excited, and you’re on the brink of sealing a $2 million SAFE financing. The future looks bright, and you’re already dreaming about how to use that capital to scale your business. 🚀💸 But there’s a catch. The investors want to dive into your data room first. Suddenly, what seemed like a guaranteed win is now under the magnifying glass. As you start preparing, here are a few legal landmines to look out for – they could blow up the financing round 🤯 Some common issues to watch out for: 🔴 Mistake #1: Unissued Founders’ Shares You might have promised yourself a significant stake in the company (e.g., through a founder agreement), but if those shares aren't officially issued, investors could see this as a red flag. Make sure your equity distribution is crystal clear and legally documented, including board consent, stock purchase agreements, and 83(b) elections filed with the IRS. 🔴 Mistake #2: Unfavorable Angel Investment Terms Those early angel investments seemed like a win at the time, but if they were made on terms that are unfavorable to founders, it could complicate future funding rounds. Review those agreements with a fine-tooth comb and be ready to explain or renegotiate if necessary. 🔴 Mistake #3: Unsigned Options for Employees and Advisors Your team is your greatest asset, but if their options aren’t properly documented and signed, it could jeopardize their commitment and your future hires. Ensure all agreements are formalized and fully executed. 🔴 Mistake #4: Intellectual Property Issues If your company’s crucial IP isn’t officially assigned to your company, you could face major legal battles down the road. Double-check that all IP is securely owned by the company and properly documented, including IP assignment agreements for all contractors and employees. Don’t let these legal pitfalls undermine your startup’s success. 🛠️✨ Need help navigating these potential deal-breakers? Let’s connect and make sure your startup isn’t just a great idea, but ready to raise funds from top VCs and angel investors! #Startup #Funding #LegalAdvice #InvestorPitch #StartupSuccess #Entrepreneurship #startuplawyer #startupfounder