This document provides an overview of topics relevant to early-stage startups seeking funding, including when to incorporate, what investors examine in due diligence, and common terms in funding agreements. It recommends incorporating with legal counsel to limit personal liability, establish clear ownership of intellectual property, and facilitate a smooth due diligence process for investors. Key points covered include the differences between equity and debt financing, typical preferred stock terms like valuation, liquidation preference, and protective provisions, and debt financing terms such as interest rates, maturity dates, and conversion qualifications. The document emphasizes being prepared with organized corporate records to impress investors and simplify closing a round of funding.

1. General Corporate Overviewfor Early-Stage Startups Presented by: Inna Efimchik

3. What do investors look at in diligence

6. Commitment

7. Risk of liability

9. you are saving $, so you don’t hire an attorney

10. you write out the terms of your “partnership” and everyone signs it

12. you are saving $, so you don’t hire an attorney

13. you write out the terms of your “partnership” and everyone signs it Scenario 1: on the way to a prospective customer meeting a co-founder is in a serious car accident & injures a pedestrian

15. you are saving $, so you don’t hire an attorney

16. you write out the terms of your “partnership” and everyone signs it Scenario 2: a co-founder takes a job at another company & plans to use the technology he has been developing for that company

18. you are saving $, so you don’t hire an attorney

19. you write out the terms of your “partnership” and everyone signs it Scenario 3: a co-founder decides not to pursue the venture any more; has a falling out with other co-founders

21. Scenario 2: co-founder’s IP belongs to company

24. Their lawyers will conduct thorough legal due diligence

25. Investors don’t like surprises

26. They are conservative pattern-recognition experts

27. Legal diligence review that unveilsred flags can slow down or even jeopardize a financing altogether

29. Founder equity vesting subject to acceleration

30. Founder equity improperly granted (e.g. w/out board approval)

33. Executed invention assignment agreements

35. If you don’t maintain proper corporate records  nightmare

37. Term Sheets

40. debt converts into equity upon a funding event

42. Dividends — usually 8%, non-cumulative, when, as and if declared

43. Liquidation Preference — investors’ proceeds on a sale of the company; can be 1x, 2x, etc., participating or non-participating

50. Maintain organized corporate records (or have counsel do it for you)