An investment round represents a key opportunity to accelerate the growth of any startup. However, without a solid legal foundation, this process can lead to uncertainties, failed negotiations or even the loss of interest from potential investors. Preparing each legal aspect in advance is essential to convey confidence, solvency and professionalism during any due diligence analysis.
• Having good legal advice specialized in startups can make the difference between closing a successful round or seeing opportunities diluted due to avoidable issues.
• Understanding the project and aligning the legal structure. Before reviewing documents or preparing presentations, it is essential that the founding team has clarity about its business model, long-term vision, target market and key differentiators. This clarity must also be reflected in the legal structure of the company. It is common to find corporate bylaws that are not adapted to a startup in a growth phase, with limitations that hinder the entry of new partners or the issuance of preferred shares. Detecting and correcting these points in time is key for the round to move forward without obstacles.
• Coherence between the financial plan and the legal structure. Although the financial plan is usually developed from an economic perspective, its credibility with investors also depends on its legal consistency. An aggressive growth plan must be accompanied by bylaws that contemplate capital increases, dilution or the issuance of new financial instruments. Similarly, the cap table must be clear and up to date, accurately reflecting both the current situation and potential future scenarios. Legal advice for startups at this stage not only reviews documents, but ensures alignment between strategy and corporate structure.
• Essential legal documentation before seeking investment. To access external capital, any startup must have an organized and updated document base. These are the main elements that investors usually request during the analysis process:
– Corporate bylaws that allow investment without the need for complex reforms.
– Shareholders’ agreement with clear clauses on key decisions, founder exits, vesting and drag-along rights.
– Signed and updated labor and commercial contracts.
– Proof of ownership over intangible assets such as technology, software or brand.
– Organized data room with financial statements, minutes, tax certificates and other corporate documentation.
Having these elements ready conveys professionalism, avoids rushed negotiations and speeds up timelines.
• Valuation and choice of the right financial instrument. One of the most delicate aspects in a round is defining the startup’s valuation. This decision directly impacts the dilution of the founding team and the investor’s perception. In early stages, many startups opt for instruments such as convertible notes or SAFE agreements, which allow postponing the valuation until a later round. From a legal perspective, it is essential that these instruments are precisely drafted. Ambiguities in the terms can generate conflicts in future rounds or with new investors. A specialized legal team will know how to adapt these contracts to protect the interests of all parties involved.
• Key legal aspects in agreements with investors. In any investment round, one of the most critical elements is the correct drafting of the agreements between the startup and the new partners. These documents must clearly reflect the terms of the agreement and foresee future scenarios that may affect the corporate structure or control of the business. It is essential to include clauses regulating information rights, strategic decision-making, entry of new investors or possible share transfers. Mechanisms such as drag along or tag along should also be established, as well as restrictions on the transfer of shares. Experience shows that many conflicts between founders and investors arise from omissions or ambiguous wording in these agreements. Proper legal advice allows anticipating these situations, establishing balanced conditions for all parties and providing legal certainty to the project’s growth.
• Frequently asked questions before opening a round.
– Is it mandatory to have a shareholders’ agreement before raising investment?
It is not legally mandatory, but it is highly recommended. Most investors will require it as a minimum condition. Not having one may result in a loss of negotiating power or even the investor withdrawing from the process.
– What happens if one of the founding partners leaves during the round?
In the absence of vesting clauses or clear exit agreements, a partner leaving may negatively affect the project’s valuation and slow down the investment.
– How do I know if the startup is legally ready for a round?
The best option is to carry out an internal legal audit, reviewing bylaws, agreements, contracts and registry status. A legal team for startups will be able to design a roadmap adapted to the project’s timing and needs.
This publication does not constitute legal advice.
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