This Week in Startups Legal must-haves before raising capital with Becki DeGraw | Wilson Sonsini Startup Legal Basics
Aug 22, 2024
Becki DeGraw, a partner at Wilson Sonsini, specializes in guiding startups through legal intricacies essential for successful fundraising. In this conversation, she highlights critical legal oversights like cap tables and intellectual property assignments that founders often miss. Becki warns against the risks of DIY legal documents, emphasizing the value of professional advice. She also discusses employee stock option plans and the complex landscape of mergers and acquisitions, providing invaluable insights for early-stage founders.
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Early Legal Counsel
- Get legal counsel involved early in your startup's journey, even before receiving a term sheet.
- Early legal involvement can prevent delays and costly cleanups during fundraising.
Deal-breakers in Due Diligence
- Not all legal oversights are deal-breakers for investors.
- However, issues like cap tables, IP assignments, and employment agreements will hold up closing.
DIY Legal Documents Risks
- Founders sometimes modify standard legal documents like SAFEs without legal advice, leading to unfavorable outcomes.
- One founder added a clause allowing them to repay investors instead of converting their investment to equity, disadvantaging the investors.