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

58 questions on getting diligence ready before you raise, answered and cited by the UpLaw editorial team.

• Can a company grant equity under an option plan before shareholders approve it?
• Could a friends-and-family round create problems when raising institutional money?
• Does paying a contractor mean the company owns the work?
• Do I still have to attach a copy of my 83(b) election to my tax return?
• Do SAFEs and convertible notes need to appear on the cap table?
• How big should a startup's employee option pool be?
• How can a startup reduce its Delaware franchise tax bill?
• How does a venture round change board composition and control?
• How does the $100,000 ISO limit trip up growing startups?
• How do you convert an LLC into a Delaware C-corporation before a raise?
• How do you run a virtual data room well during fundraising?
• How early should a founder start getting diligence-ready?
• How should a startup data room be organized?
• How should a startup fix a missing contractor IP assignment?
• How should trade secrets be handled in a data room?
• Is there any downside to filing a Section 83(b) election?
• Should a founder disclose a legal problem proactively or wait for the investor to find it?
• What agreements close the IP chain of title for a startup?
• What are protective provisions in a venture financing?
• What are the most common IP chain-of-title gaps found in startup diligence?
• What are the requirements for an option to qualify as an ISO under Section 422?
• What are the Section 409A valuation safe harbors?
• What belongs in a startup's corporate minute book?
• What contract provisions should you check before converting or restructuring your entity?
• What does fully diluted mean on a cap table?
• What does it mean for a startup to be diligence-ready?
• What financial records do early-stage investors expect?
• What findings most often kill or reprice a venture deal?
• What governance practices should a startup adopt before institutional investors arrive?
• What happens if a founder misses the 30-day 83(b) deadline?
• What information must a Section 83(b) election contain?
• What is a 409A valuation and why does a startup need one?
• What is a ghost founder, and how do you prevent one?
• What is a related-party transaction problem in startup diligence?
• What is a Section 83(b) election and why do founders file one?
• What is a term sheet and which terms deserve the most attention?
• What is founder vesting, and what is the standard schedule?
• What is Qualified Small Business Stock and why does it matter to founders?
• What is the deadline for filing a Section 83(b) election?
• What is the difference between an ISO and an NSO?
• What is the difference between broad-based weighted average and full ratchet anti-dilution?
• What is the difference between Rule 506(b) and Rule 506(c)?
• What is the option pool shuffle, and how does it lower your valuation?
• What legacy investor rights from earlier rounds can complicate a new financing?
• What legal risks does a pitch deck carry?
• What makes a startup cap table clean?
• What makes a startup financial model credible to investors?
• What should a founder stock purchase agreement include beyond vesting?
• Who owns a patent on an invention made by an employee?
• Why does board authorization matter for every share issuance?
• Why does corporate good standing matter to a financing?
• Why does diligence readiness matter more than negotiating valuation?
• Why do investors diligence the securities-law compliance of a startup's earlier rounds?
• Why do startups incorporate in Delaware specifically?
• Why do venture-backed startups incorporate as Delaware C-corporations?
• Why is IP chain of title the most important thing an investor diligences?
• Why should founders put themselves on a vesting schedule before raising?
• Why won't venture investors sign an NDA before hearing a pitch?