Document Everything for Legal Protection

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In situations where a company's viability is in question, investors tend to shy away if there are no remaining assets or if liquidation is imminent. Even in rare cases where the company successfully revives itself post-restructuring, past agreements can lead to lawsuits. The complexity of insider transactions, especially those involving distressed funding rounds and unequal benefits for insiders versus outside investors, can heighten scrutiny in legal contexts. To mitigate risks of litigation, it is crucial to meticulously document each decision-making process, involve advisors, and ensure that board records reflect thorough discussions and market validations. Appropriately capturing unanimous consent from all parties involved is essential for legal defensibility in the event of disputes.

Todays show: Wilson Sonsini Partner Becki DeGraw joins Jason on the latest edition of Startup Legal Basics! In this episode, they break down the current state of startup funding (0:37), anti-dilution provisions (7:11), re-incentivizing management teams (16:23), and much more!

Timestamps:

(00:00) Wilson Sonsini Partner Becki DeGraw joins Jason

(0:37) Market update: Current state of startups and funding

(1:21) Consolidated investment trends and the venture capital slowdown

(4:23) The importance of due diligence, runway, and down round impacts

(7:11) Anti-dilution provisions and strategies for investor communication

(16:23) Re-incentivizing management teams and insider-led funding scenarios

(23:46) Importance of investor relations and board management

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