Article · Corporate

Getting Diligence-Ready Before You Raise: A Comprehensive Guide for Founders

Type
Article
Jurisdiction
National
Date
2024-10-09
Topic
Corporate

A fundraise has two halves: the pitch, which gets all the attention, and readiness, which quietly decides whether the round closes on time, closes at a lower price, or dies during due diligence. This guide is the readiness playbook. It explains why venture-track companies incorporate as Delaware C-corporations, how to keep a cap table that reconciles line-by-line to signed and board-approved documents, and how founder vesting interlocks with the Section 83(b) election and its unforgiving 30-day filing deadline under Treasury Regulation Section 1.83-2(b). It works through IP chain of title from founders and contractors, employee equity under Section 422 and the Section 409A valuation safe harbors, corporate housekeeping and Delaware franchise tax, and the construction of a real virtual data room that mirrors how diligence counsel actually work. It maps the securities-law exposure that earlier Regulation D rounds can leave behind, names the specific findings that reprice or kill deals, and closes with a worked example and an FAQ. It is written so a first-time founder, a transactional lawyer, and a judge can all follow it, and every term of art is defined in plain language the first time it appears.

Getting Diligence-Ready Before You Raise: A Comprehensive Guide for Founders

Corporate > Securities | Published 9 October 2024 - Updated 7 January 2025 | UpLaw - uplaw.us

Readiness is the half of fundraising nobody frames on the wall: the legal, structural, and record-keeping state in which an investor's lawyer can open your data room, run the standard checklist, and find clean, complete, internally consistent answers. This guide shows founders how to reach that state before a term sheet ever arrives.

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