Series A Readiness Legal Review

Series A Readiness Review: Preparing Your Business for Venture Capital Investment

A Series A round can be a major step in the growth of your business. It is often the first institutional venture capital round where investors carry out detailed legal, financial and commercial due diligence before committing funds.

Our Series A Readiness Legal Review is a fixed-fee legal review designed to help founders identify and resolve issues before investors, their lawyers or their due diligence teams find them. We review the legal foundations of your business, highlight risks that may affect investor confidence and provide a practical report setting out what should be fixed, clarified or prepared before fundraising.

This service is particularly useful if you are planning to raise venture capital within the next 3 to 12 months and want your legal position to be organised before approaching investors.

What is a Series A round?

A Series A round is usually the first significant priced equity investment round for a startup after seed investment, angel investment or early founder funding. Investors typically subscribe for shares at an agreed valuation and expect detailed legal rights under a subscription agreement, shareholders’ agreement and updated articles of association.

Unlike some early seed rounds, a Series A investment process is usually more structured. Venture capital investors will expect to understand your share capital, intellectual property ownership, founder arrangements, employment position, commercial contracts, customer concentration, regulatory exposure and corporate history.

For founders, this means that Series A preparation is not just about pitch decks, forecasts and investor introductions. Your legal structure also needs to support the investment story you are presenting.

When is your business ready for Series A legal due diligence?

You may be commercially ready to raise a Series A round if your business has traction, a credible growth plan and investor interest. However, legal readiness is a separate question.

You should consider a Series A readiness review if:

• You are planning to raise institutional venture capital. Venture capital investors usually expect a higher level of legal due diligence than angel investors or informal seed investors. Any gaps in your legal structure may slow down the round, affect valuation discussions or lead to investor protection provisions being requested.
• Your cap table has become complicated. Previous funding rounds, option grants, founder transfers, convertible loan notes or advance subscription agreements can create issues if they have not been documented properly. A clean and accurate cap table is one of the first things investors and their lawyers will want to see.
• Your intellectual property position has not been reviewed. Investors will want comfort that the company owns or has valid rights to use the IP on which the business depends. This is especially important where founders, freelancers, contractors, agencies or overseas developers have contributed to the product.
• Your corporate records are incomplete. Missing board minutes, shareholder approvals, Companies House filings, option documents or share issue records can create avoidable problems during due diligence. These issues are usually easier to fix before a transaction timetable starts.
• You want to reduce friction once investor due diligence begins. A readiness review can help you deal with problems before they become negotiation points. This can make the investment process more efficient and improve your credibility with investors.

What do venture capital investors look for?

VC investors are not only investing in your growth potential. They are also assessing whether the company is legally investable and whether there are hidden risks that could affect value, control or future exit prospects.

Typical investor focus areas include:

• Ownership and control. Investors will review who owns the shares, whether shares were validly issued, whether any founder or early investor rights exist and whether the company has complied with its articles and shareholders’ agreements.
• Founder commitment. Investors often expect founders to remain involved after completion and may require vesting or leaver provisions if these are not already in place.
• IP ownership. If your business relies on software, data, branding, designs or technical know-how, investors will want evidence that the company owns or controls those assets.
• Employment and contractor arrangements. Investors will check whether staff, consultants and contractors are engaged on appropriate terms, including confidentiality, IP assignment and restrictive covenant provisions where relevant.
• Commercial risk. Key customer, supplier, licensing, SaaS, reseller and partnership agreements may be reviewed to identify termination rights, change of control issues, exclusivity, liability exposure and revenue concentration.
• Corporate housekeeping. Investors and their lawyers will expect accurate statutory registers, Companies House filings, board approvals, shareholder resolutions and historic investment documents.

Common legal issues investors uncover during startup due diligence

Many legal issues uncovered during Series A due diligence are not fatal, but they can cause delays, additional costs and uncomfortable investor questions.

Common issues include:

• incorrect or incomplete cap tables;
• shares issued without proper approvals;
• missing subscription, shareholder or founder agreements;
• undocumented option promises;
• EMI option issues or missing valuations;
• IP created by contractors without written assignment;
• founders using personal accounts, code repositories or domains;
• employment contracts that do not protect confidential information or IP;
• commercial contracts containing termination, exclusivity or change of control risks;
• missing board minutes or shareholder resolutions;
• discrepancies between Companies House filings and internal records; and
• unresolved founder, adviser or early investor rights.

The earlier these issues are identified, the easier they usually are to resolve.

The legal due diligence process for Series A investment

Legal due diligence normally involves the investor’s lawyers reviewing the company’s legal documents and asking questions through a due diligence request list. The company is usually expected to provide documents through a data room.

The investor’s lawyers may review:

• constitutional documents;
• statutory registers;
• shareholder and investment agreements;
• cap table and share issue history;
• option documents;
• board and shareholder approvals;
• employment and consultancy agreements;
• IP assignments and licences;
• key customer and supplier contracts;
• debt, loan note or SAFE / ASA documents;
• litigation or dispute information;
• data protection and regulatory documents where relevant.

If problems are identified late in the process, they may need to be dealt with under pressure. This can result in additional legal work, investor conditions, warranties, indemnities, price adjustments or delays to completion.

Our Series A Readiness Review service

Our Series A Readiness Legal Review is designed to give founders a clear, practical picture of their legal position before investor due diligence begins.

As part of the review, we can assess:

• Cap table and share history. We review your current ownership structure, previous share issues, option arrangements and investment documents to identify inconsistencies or unresolved rights.
• Share structure and constitutional documents. We consider your articles of association, shareholder rights, share classes and any existing investor consent rights that may affect a new venture capital round.
• IP ownership and protection. We check whether the company owns or has appropriate rights to key IP, including software, branding, product materials, technical assets and contractor-created work.
• Employment and founder arrangements. We review founder, employee, consultant and contractor documents, including confidentiality, IP assignment, notice, restrictive covenant and leaver provisions.
• Commercial contracts. We review key customer, supplier, SaaS, licensing, agency, reseller and partnership contracts to identify provisions that may concern investors.
• Corporate records. We review statutory registers, board minutes, shareholder resolutions, Companies House filings and other corporate records to identify missing or inconsistent documents.

The outcome is a written report identifying issues before investors do. The report will usually distinguish between matters that should be fixed before fundraising, matters that should be explained to investors and lower-priority housekeeping points.

Fixed-fee Series A legal review options

We can usually offer fixed-fee review options depending on the size and complexity of your business, the number of documents to be reviewed and how quickly you need the work completed.

A typical fixed-fee review may include:

• an initial scoping call;
• review of agreed documents;
• a written issues report;
• prioritised recommendations;
• a follow-up call to discuss next steps; and
• where appropriate, a separate estimate for remediation work.

Costs depend on the volume of documents, number of shareholders, historic funding rounds, option arrangements, IP complexity and whether any urgent corrective work is needed. We will provide a scope and fee estimate before starting work.

Why choose Jonathan Lea Network for Series A readiness legal advice?

Jonathan Lea Network advises startups, founders, growth companies and investors on corporate, commercial and investment matters. We are well placed to review the issues that commonly arise before a venture capital round because we combine corporate finance experience with practical commercial contract and IP awareness.

Our approach is designed to be clear and founder-friendly. We do not simply identify legal issues in isolation. We explain how they may affect investor confidence, transaction timing, valuation discussions and your negotiating position.

Where issues need to be fixed, we can help with the follow-on work, including updating articles, preparing shareholder resolutions, documenting share issues, reviewing investment documents, improving employment contracts, preparing IP assignments and helping organise your data room.

How can we help?

We will respond to most enquiries with both an indicative scope of work and a fee estimate, as well as the offer of a complimentary 20-minute discovery video call to discuss your issues and how we can help, before sending a more considered formal fee estimate via email.

In some limited cases, if you would just like initial advice and guidance on a call, we may instead offer a fixed fee appointment (commonly charged between £280 and £500 + VAT) whereby we will review the information you provide, hold a video call consultation and then follow up with an advisory email (as well as a fee estimate for any further work identified)

Please email wewillhelp@jonathanlea.net or call us on 01444 708640 as a first step. We first need an overview of the background and your issues, together with any significant documents, to provide an indicative scope of work and fee estimate.

Call us on 01444 708640 or email wewillhelp@jonathanlea.net to arrange a confidential discussion.

FAQ: Series A Readiness Legal Review