![]() ![]() ![]() Separately, if you have any registered trademarks, patents or domain names (or applications for any of them), make sure that they are registered in the company’s name and not one of the founder's or employee's as an individual. Do not rely on an implied understanding that the IP was created for the company – the assignment must be in writing.Īs with your due diligence materials, you will be in a much better position if you can take care of this before your fundraising, particularly if any of the early employees or contractors has since moved on (where, depending on the circumstances, there is sometimes a chance that they may not be co-operative). This can be through an IP assignment provision in an employment contract or a separate IP assignment agreement. This means that if there are any problems or claims around IP, the risk and cost will effectively fall back onto the founders and/or the company.Īs such, it is critical that you either have – or obtain – an express written assignment of all IP created for the company. Investors also require the company and the founders (or the management team) to warrant that the company has full ownership of (or valid licences for) all of the IP which the company uses. Through due diligence, an investor will want to see evidence that the company has full and clean title to the IP underpinning the business. This leaves the company susceptible to claims further down the line that the IP which it is using and monetising does not belong to it or that a third party has rights in that IP. In the early days, a company may not own all of the intellectual property (IP) created for the company by its founders, initial employees or contractors. It may not be exactly what your investors ask for, but it will almost certainly cover substantially the same areas and requests, and by being on the front foot you can try to avoid investors even needing to send their full "blanket" request lists. If you need guidance on what documents to pull together, ask a lawyer or investor for a sample legal due diligence questionnaire. You will also have the chance to identify and address or explain any gaps or issues before you get too far down the track with the investors (at which point those sorts of issues tend to be more disruptive). You will be in a great position to make your information available quickly when the process kicks off (ideally at that point through a secure virtual data room or, alternatively, via a cloud hosting site). ![]() If you can pull this together early, you will be ahead of the game when the investors send you their due diligence request lists. This should include, among other things, all of your incorporation and constitutional documents your annual and management accounts and cash flow forecasts tax computations (if any) key commercial contracts intellectual property licences or assignments (including any development agreements) employment contracts real estate leases or licences and insurance policy summaries. They will also want to check there are no skeletons in the closet, which would mean the business is not worth as much as the pre-money valuation you have initially agreed with them.Īs part of that process, you will need to disclose a fair amount of information about your business, including all of your key financial, legal and commercial documents so you should be organised and prepared ahead of time.īefore you even begin talking to investors, start to collect copies of your principal documents and organise them in a clear, logical folder system. They need to satisfy themselves that your business matches your initial description and valuation aspirations. Due diligenceĪs part of the fundraising process, your investors will almost certainly do some due diligence on your business. So how do you avoid these issues and make your deal run as smoothly as possible? 1. Venture capital funds (VCs) will give your business a thorough assessment before they invest and you may end up finding that you are less prepared for the process than you thought you were.Īs advisors to a range of companies seeking VC investment, we see the same issues crop up time and time again as founders seek investment before they have got their houses in order. Preparing for and going through a venture capital fundraising for the first time can be tough. ![]()
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