You’ve got traction, a compelling deck, and warm intros to the right funds. Don’t let a messy data room kill your deal.
You need a clear picture of Series A investor expectations. Most founders spend the months before a Series A obsessing over pitch narrative and financial models but experienced investors know that the story in your deck and the story in your data room don’t always match. When they don’t, deals slow down, valuations may get a haircut, or worse, term sheets get pulled. Getting your legal house in order isn’t a bureaucratic formality. It’s a signal that you’re a founder who builds things properly.
We connected with Caravel Lawyer, Peter Goode, to identify what investors are actually looking for when it comes to corporate organization, and what you need to have buttoned up before you knock on doors.
Cap Table Hygiene: Know Who Owns What (And Why)
A messy cap table is a red flag, full stop. Investors will scrutinize every single number (prior rounds, convertible notes, SAFEs, option grants, warrants) and they expect it all to be accurate, reconciled, and properly documented. Discrepancies between your cap table and your underlying agreements don’t just create legal friction; they raise questions about how you run the business.
Clean it up. Use proper equity management software. Make sure every instrument is documented and every number ties out.
Corporate Housekeeping: Tidy Up Before Diligence Begins
Think of diligence as an unannounced inspection of your back office. Organizational documents, board and shareholder resolutions, jurisdictional registrations — all of it needs to be current and in order. Loose ends from the incorporation stage (unsigned documents, missing consents, unfiled registrations) that felt harmless at the time have a way of surfacing at the worst possible moment. Deal with them now, not when you’re already under a term sheet timeline.
Founder and Key Employee Agreements: Lock In the Team (On Paper)
Investors are betting on you and your team. They need to see that the company has proper employment or consulting agreements in place, that IP assignment provisions are airtight, and that vesting schedules reflect real commitment. Non-compete and non-solicitation provisions matter too, particularly in jurisdictions where they’re enforceable. If your star engineer is technically a contractor with no IP assignment agreement, that’s not just a legal problem, it’s a company ownership problem.
IP Ownership: If It’s Not Assigned, You Don’t Own It
This one often surprises founders. Intellectual property created by founders before incorporation, or by contractors without proper agreements, may not legally belong to your company, regardless of who built it or who paid for it. Every investor will check. Make sure all IP is formally assigned to the company, invention assignment agreements are signed, and NDAs are in place with anyone who had access to sensitive information. Your core product should not have a question mark over it heading into a financing.
Option Pool and Equity Incentive Planning: Build the Runway for Future Hires:
Series A investors will almost always expect a meaningful option pool. If yours is too small, they’ll require a top-up as a condition of the round, which will likely dilute existing shareholders before the new money even comes in. Get ahead of this by having a board-approved stock option plan with sufficient room for grants. Know your current pool utilization, understand how investors will model the post-round pool, and be ready to have an informed conversation about it at the term sheet stage.
Material Contracts: Watch for Hidden Deal Friction:
Your key customer, supplier, and partnership agreements may contain provisions that become very relevant the moment you raise a significant round. Change-of-control clauses, consent requirements, and assignment restrictions can create real friction (or real leverage for the counterparty) during or after a financing. Review your material contracts before diligence, not during. Know where your exposure is so you can address it proactively.
Regulatory and Compliance Basics: No Surprises, Please
Depending on your industry, you may have licensing requirements, privacy and data protection obligations (PIPEDA, GDPR, CCPA, take your pick), or securities law compliance considerations from prior funding rounds. Undisclosed regulatory exposure or a prior issuance that didn’t follow proper exemption procedures will slow things down considerably.
Governance Framework: Show You Take This Seriously
A properly constituted board, appropriate protective provisions for prior investors, and basic information rights in place aren’t just formalities. They signal to investors that you understand how a well-run company operates, and that you’re building an institution, not just a product. Founders who treat governance as an afterthought often create problems for themselves down the road. Those who build it in early tend to build better companies.
The Bottom Line
Series A diligence is a full audit of your company. The founders who move fastest through it (and negotiate from the strongest position) are the ones who treated legal and governance as infrastructure, not overhead. Getting this right before you go to market isn’t just about avoiding problems. It’s about showing up like you belong at the table. Remember that the people looking at your company have likely being doing this for a living for years and are professionals, so they will catch things you may not have thought were important or even aware of.
Not sure where your gaps are? We’ve been doing this for 20 years, and we’re here to help. Connect with our team today.