A 60-Second-Blog-Post With 5 Legal Tips That Will Make Every Founder’s Life Easier

Plus, a shortlist of must-see films at Sundance this year!

As an associate at General Catalyst and Director of Portfolio and Operations at Rough Draft Ventures, I’ve had the great privilege of working with dozens of founders who are raising capital to build their businesses. With every investment comes pages of legal documents which, if handled poorly, can turn into hundreds of legal emails.

Aside from the pitch, dealing with legal documents is often the first business interaction founders have working with new investors, so it’s important to make a strong first impression. Here are some tips to run a smooth process:

  1. 📝 Always include a red-lined copy. Every time you make a change to a legal document, make a red-lined copy! When you send it to your investors or other involved parties, send both the clean, updated and red-lined copy. That way, your investors and their legal counsel can easily review the changes and get back to you quickly!
  2. 📆 Always update the date. Nine out of 10 email threads I’m on regarding legal documents end like this: “Looks like these are good to go. As a last edit, can you please update the date to reflect today’s date? With that, we’ll be good to sign!” Updating the date will save us that extra email and speed up the approval process.
  3. 🚨 Alert your investors A.S.A.P when you anticipate they’ll need to review something. As soon as you enter an engagement that will require any sort of legal review and approval, let your investors know and give them an ETA for when you’ll need signatures. It’s okay if you don’t have the final docs yet, or even any docs for that matter. Just let them know so it’s on their radar. As soon as you have a rough draft of the documents, share the draft with your investors with the disclaimer that they’re pending edits. Follow-up with redlined copies from there. That way, any major issues can be flagged with plenty of lead-time and prevent a fire-drill before close. This is my favorite email ever (I’ve never received it, but I dream that one day I will!):

Hi Denali,

I wanted to let you know that we just received our first term sheet for our Series A round. The agreed-upon terms are a $4M investment with a $20M pre-money valuation. We’ll be spending the next few weeks closing out the round but wanted to give you a heads up to ensure a smooth close. As of now, we’re shooting for a March 30 close. Attached is a draft of the terms, subject to revisions. I’ll follow up with a final copy and redlined version as soon as I have them. Please let me know if you have any edits/comments and I’ll work with our counsel (cc’ed) to address them.

In the meantime, could you please send over the following to be listed in the docs: 1) Entity name 2) Signature block 3) Corresponding address/email?

Let me know if you have any questions!

Thanks,

A very considerate-and-organized founder

4. 💌 Always provide a closing email on a separate thread. Despite good intentions, every fundraising process will inevitably require some back-and-forth and a few revisions. Once all changes have been made and everyone’s agreed they’re ready to sign, send them over on a new, clean thread. That way, everything is in the same place and can be super easily signed, saved, and returned. This thread is fondly referred to as “the closing packet.”

Here’s what to include in that closing email:

If you’re communicating with existing investors who are approving docs for a new round of funding:

  • Term sheet (SAFE, Stock Purchase Agreement, etc.)
  • Separate PDF with signature pages
  • Pro-forma cap table
  • Most recent COI

If you’re communicating with new investors who are joining a larger round:

  • Term sheet (SAFE, Stock Purchase Agreement, etc.)
  • Separate PDF with signature pages
  • Pro-forma cap table
  • Most recent COI
  • Wire instructions

💡 Pro-tip: Use a descriptive subject line so it doesn’t get lost in their inbox (“For Execution:CompanyName Series A Closing Packet” is a great one!)

5. Following close, send a special edition investor update so everyone’s on the same page. This step is often over-looked by founders, but is well-worth the time.

Here’s what to include in that email:

  • A thank you!
  • Introduce your investors, new and old
  • Provide a brief company overview including a current KPI snapshot and one-liners on the exec team (maybe even cc them). Also outline key goals for the next quarter.
  • Make your first asks!
  • Include an updated blurb on the company (for making introductions, including on investor website, etc)
  • Touch on plans to announce the investment (Has the Form D notice been filed? Do you want to keep it quiet for a while or coordinate a press push?)
  • Outline communication standards moving forward (i.e. “Moving forward, I’ll plan to send out monthly investor updates summarizing key wins, challenges, and asks. If you’d like to set up a standing call to review these points, let me know and I’d be happy to.)

BONUS ROUND!!!! I recently overheard our firm’s co-founder David Fialkow list off the must-see Sundance Films. This is important. In addition to being one of the most notable venture capitalists, Fialkow this year produced a documentary that received an Academy Award for Best Documentary Feature. I didn’t have a pen to write them down so I jotted them down here and figured I’d copy & paste them somewhere else. But why not share the wealth?!