LegalEdge’s Helen Goldberg co-hosted a roundtable on ‘Preparing for you next fundraise (or what not to F*** Up!)’ with Jon Edirmanasinghe from Solano Partners and Hugo Lough from Mercia Ventures – and here are the key take aways:
Cap table discipline
- Most issues that derail due diligence live in the cap table.
- Biggest early mistake: issuing shares too freely instead of using options.
- Put proper foundations in place: vesting schedules, shareholder agreements with clawbacks, clean rules for board seat transfers, and ideally a small, manageable shareholder base.
EMI and option schemes
- A consistent source of pain for founders.
- Filing mistakes can invalidate the whole scheme or leave long-standing employees with nothing on exit.
- Don’t treat EMI as an admin task; get proper legal oversight and structure schemes in a way that aligns with exit outcomes.
- It was noted that it’s rare to see one that hasn’t been problematic from a VC perspective
IP ownership and valuations
- Before Series B, investors don’t care about formal valuations, so don’t waste time or money getting one.
- At Series B, investors will always run their own independent valuation work.
- What actually matters is clean IP ownership from day one.
- Common issues: design agencies retaining rights, contractor work not properly assigned, missing employee IP documentation.
- These become major red flags at Series B onwards and are very hard to fix late.
Running the fundraising process
- Prep starts 6–12 months before a raise.
- Build the funnel: longlist ~30 investors, narrow to 15–20, then 3–5 serious bidders.
- Competitive tension is essential for favourable terms.
- Expect 4–6 weeks of exclusivity for due diligence at the end, which is why pre-work matters.
Due diligence readiness
- Legal DD focuses on cap table, options, IP, senior employment agreements, customer contracts, and partner agreements, etc.
- Avoid “change of control” clauses in customer contracts that can slow or block a deal.
- Have your documentation clean and well organised far in advance.
Team & finance function
- Series A: need a strong financial controller.
- Series B: need a proper CFO or high-quality fractional CFO.
- CEOs must know their metrics cold; investors won’t accept deferring everything to finance/others (e.g.CTO).
Investor selection & alignment
- Understand investor style: hands-on vs hands-off, growth vs entrepreneurial, appetite for secondary.
- Founder secondary at Series A is now common (£250–500k typical).
- Take references on funds and make sure they’re actively deploying.
- Often VCs will say they will help and / or provide talent but don’t rely on this – more likely to be interim or fractional recommendations.
Other considerations
- Balance primary vs secondary depending on founder needs and investor appetite.
- Model your personal cashflow early, ahead of strategic decisions such as secondary or full sales.
- No need to flip to Delaware for US investors; UK domicile is fine.
Planning a fundraise in the next 6–12 months? Book a call with us here to talk through your plans and make sure you’re set up for success.
