• 2022-08-11

Legal consideration for startups looking to seek funding from investors

Seeking funds is a crucial part for startups as every business need funds to run effectively,and to ensure growth and sustainability. For start-ups looking to seek funding from investors, here are some legal considerations to bear in mind:

1. Legal Business structure and Registration: It is not enough to decide to do business but the founders must carefully consider the type  of business structure that suits the nature of business they intend to seek funding to run. After this major decision, the next legal step to take is to have it registered with CAC. No business is legally recognized unless it is registered with CAC.

2. Ensuring that all necessary Intellectual Property registrations such as Trademarks, designs, patent and copyrights are done.

3. Regulatory Complaince with necessary agencies such as CAC and FIRS, and obtaining necessary permits from agencies such as SON, NAFDAC, SEC, NERC etc (as the case may be).

4. Having a clearly mapped out preferred nature of investment / funding type.

5. Having necessary agreements such as Founders Agreements, Investors Agreement, Non- Disclosure Agreement, Shareholders Agreement etc. These provide operational structure and minimise the possibilities of future conflicts.

6. Having a detailed and accurate capitalization which clearly states the percentage of ownership, equity dilution and value of equity.

7. Having a well prepared pitch deck and proper presentation to potential investors.

Having the above major factors in place can help a start up seek and obtain funding from investors as every potential investor wantto have the assurance that a start up is investment worthy and that they would have value for their investment. With the above mentioned considerations, it is worthy to state that start ups need professionals to navigate these legal requirements.