If you’re a start-up or even a more mature business looking to grow, you might well be considering venture capital (VC) investment. We frequently help businesses like yours to gain funding and successfully move to the next stage of their development, so here are a few things to consider, but please do get in touch if you’d like to know more.
1 – The Pitch deck
Setting out your vision is vital to attracting VC attention and money. So, it is very important to have a convincing pitch deck. So:
- It should include; details of the problem you are solving, how you are unique, the market opportunities, your business model, what you have achieved so far and your aims for growth, who are your competitors (and why you are better), details of your team, what you want to raise, what it will be used for, and what the VC can get in return.
2 – Company Structure, Share Capital & Governance
It is important to check that the company’s ownership and management records are up to date, and that shares have been properly issued. Some things to check are:
- Reviewing the company’s statutory books, including registers of members, directors, and PSCs (Persons with Significant Control) to make sure they are up to date.
- Verifying that all shares have been properly issued with supporting board/shareholder resolutions and filings, and that all requirements for share issues in a Shareholders’ Agreement (e.g. a certain percentage of shareholders may have to agree to a share issue), and the Companies Act (pre-emption rights) and articles have been complied with. This will also help to identify the process to follow for issuing shares to the VC.
- Correcting any discrepancies in share allocations, transfers, or class rights.
- Making sure you have maintained a current and fully diluted cap table, reflecting all issued shares, options, warrants, and convertible instruments.
- Ensuring your internal records and Companies House filings are consistent.
- Removing or clarifying any informal or undocumented equity promises or arrangements.
- Ensuring all necessary board and shareholder resolutions have been made and where required, filed at Companies House.
3 – Intellectual Property (IP) Ownership
Another area that can lead to problems is ownership of the intellectual property the company relies on. So:
- Ensure all IP created by employees, consultants, or founders is assigned to the company via written agreements.
- Audit use of third-party IP and ensure proper licensing and compliance with open-source software terms.
- Register key trademarks, patents, and domain names in the company’s name and maintain renewals.
4 – Employment Contracts
Employees are also another important area for VCs, who will want to see everything is in order. Some things to check are:
- Ensuring every employee has a signed contract with clear terms on duties, notice, confidentiality, non-competition and IP ownership.
- Reviewing consultant agreements to confirm scope, deliverables, and IP transfer provisions.
5 – Commercial Contracts & Key Customer Agreements
As well as employee contracts, you’ll need to check that contracts with customer and suppliers are in order.
- Ensure contracts with major customers, suppliers, and partners are documented, signed, and legally enforceable.
- Check for clauses that could affect the business post-investment, such as termination on change of control.
- Document any IP licenses or joint ventures and clarify any revenue-sharing terms.
6 – Data Protection Compliance
Another important area that any VC will want to be certain has been handled correctly.
- Ensure the company is compliant with GDPR, including a privacy policy and internal data handling protocols.
- Have data processing agreements in place with suppliers and customers, especially where personal data is handled.
- Conduct a basic data mapping exercise to show data flows and consider if you need to carry out or review Legitimate Impact Assessments. Both are particularly important for tech or SaaS companies.
7 – Litigation or Dispute Clean-Up
VCs will want to know of potential (or actual) disputes or litigation. Make sure to:
- Disclose any ongoing, pending, or threatened litigation or disputes with employees, customers, or third parties.
- Where possible, resolve disputes ahead of investment and retain relevant settlement documentation.
- Identify any warranties, indemnities, or liabilities in historical contracts that may pose future risks.
8 – Tax & Financial Compliance
Although your accountants should advise on this, we’d recommend these points as well.
- Ensure all Companies House filings (confirmation statements, annual accounts) are up to date.
- Verify that there are no outstanding issues with HMRC (VAT, PAYE, Corporation Tax).
- Apply for SEIS/EIS Advance Assurance to support tax-efficient investment and make your company more attractive to VCs.
- Keep detailed records of R&D tax credit claims to support due diligence and reduce exposure.
9 – Data Room
And finally, arrange for key documents to be uploaded to a digital data room, with access given to relevant people on both sides of the deal (including accountants, lawyers, and need-to-know management).
- Ensure a detailed, logically ordered data room is prepared, with its structure corresponding to key areas (such as company structure, commercial contracts, employment contracts, financial and tax) and referenced to the investor’s due diligence questionnaires.
- Ensure all those with access to it have agreed and signed terms of access, and that all sensitive documents are anonymised in accordance with data protection legislation and any applicable confidentiality clauses or agreements.
10 – How we can help
At Branch Austin McCormick, our specialists in corporate and commercial law can advise on the latest considerations for any business looking for funding.
We can review your documentation and highlight any areas of non-compliance, before you approach VC’s to ensure everything is in order. If you’d like to talk to us about this and find out more, please contact Martin Donoghue on +44 (0) 20 7851 0126 or MD@branchaustinmccormick.com