Raising investment is a milestone moment for any growing company. Outside funding can provide the capital to scale, build teams, develop products, and open new markets. But investors rarely part with their money lightly; they want to know your business is prepared, credible, and legally robust. In other words: investment ready.
At Murrells, we act for early-stage businesses and investors across a range of sectors. From seed rounds with friends, family and angels to later stage scale up rounds involving venture capital and institutional investment, we’ve seen where deals run smoothly, and where avoidable mistakes create costly delays. This article shares some of the lessons we’ve learned from guiding founders through that journey.
1. NAIL YOUR BUSINESS PLAN
Your business plan is your shop window. Investors expect a clear vision, robust financial forecasts, and a credible path to profitability. For most, it’s a prerequisite before any serious conversation.
Founder’s checklist:
- Are your financial projections based on realistic assumptions?
- Does your plan show a credible path to profitability?
- Could you provide an updated version quickly if asked?
2. UNDERSTAND THE TERM SHEET
The term sheet sets out the commercial and legal principles of the deal: valuation, equity split, timelines, and rights attached to shares. Although usually non-binding, term sheets carry real weight. Once terms are agreed in writing, they tend to stick; trying to reopen negotiations later is often difficult and expensive.
Negotiation dynamics:
- Who drafts first? Producing the first draft helps you set the agenda. Institutional investors often insist on their own template. Either way, don’t sign without advice.
- Focus on what matters. Investors may push hard on control rights (e.g. reserved matters, liquidation preferences). Decide what’s acceptable and what could constrain you later.
Common mistake: Accepting overly complex and/or investor friendly terms at seed stage that later deter larger investors. Keep it proportionate.
Founder’s checklist:
- Have you agreed the valuation with your investor, and do you understand how that will impact your shareholding after the round?
- Who is preparing the first draft of the term sheet?
- Have you taken legal advice before signing?
3. PROTECT CONFIDENTIAL INFORMATION
An NDA (non-disclosure agreement, also known as a “confidentiality agreement”) reassures both sides that sensitive information stays private. While not always insisted on, it’s a simple, low-cost step that can prevent real problems if a deal falls away.
During fundraising, you may have to share technical details, commercial strategy, or key contracts. Without an NDA, you risk that information being used inappropriately.
Tip: Ensure the NDA clearly defines what counts as confidential information and who can access it (e.g. advisers, group companies).
4. GET ORGANISED FOR DUE DILIGENCE
Due diligence is where investors review your company in detail: structure, contracts, finances, employment arrangements, IP, and more.
What investors notice:
- Missing statutory registers and out-of-date Companies House filings.
- Unwritten or unclear customer and supplier contracts.
- Uncertainty over who owns the company’s IP.
Practical point: Start building a “data room” early; even a simple folder with key contracts, registers, and filings. It shows professionalism and saves time later.
Founder’s checklist:
- Are your statutory books complete and accurate?
- Are all Companies House filings up to date?
- Do you have copies of all key contracts easily accessible?
5. SECURE YOUR INTELLECTUAL PROPERTY
For many early-stage businesses, IP is the crown jewel. Investors want certainty that it belongs to the company, not to individual founders, consultants, or third parties.
Red flags we see:
- Founders who built the early product but never formally assigned IP to the company.
- Contractors developing code or designs without written IP assignment clauses.
- Trade marks registered in a founder’s personal name rather than the company’s.
Why it matters: If your IP isn’t secure, investors fear that a competitor or ex-founder could later claim rights over your product. If ownership is unclear, investors may walk away or demand heavy protections. Cleaning this up post-investment is far harder (and more expensive) than doing it at the start.
Founder’s checklist:
- Is all IP formally assigned to the company?
- Do employment/consultancy contracts include clear IP provisions?
- Have you registered key trade marks and domain names?
6. EMPLOYMENT AND INCENTIVES
Investors want reassurance that your team is properly tied in. That means clear employment contracts, confidentiality clauses, and (often with larger institutional investors) share option schemes.
Practical steps:
- Put in place written contracts for all employees and consultants.
- Include confidentiality, non-compete, and IP clauses where appropriate.
- Consider an EMI or other tax-efficient share option scheme to attract and retain talent.
Founder’s checklist:
- Are employment contracts in place and up to date?
- Have you considered share options to incentivise key staff?
- Do you have clear policies on confidentiality and IP ownership?
7. THE INVESTMENT DOCUMENTS
The paperwork depends on the size and stage of the deal. At the lighter end, you might just see a simple subscription letter. For larger rounds, expect:
- Subscription Agreement – setting out the mechanics of the investment.
- Shareholders’ Agreement – governing investor rights and company governance.
- Articles of Association – updated to reflect new share classes, voting, and dividend rights.
- Disclosure Letter – where founders disclose exceptions to the warranties.
Tip: Even if they appear technical, read the documents carefully – the fine print can have long-term consequences for your company.
Founder’s checklist:
- Do the articles and shareholders’ agreement align with your growth plans?
- Do you understand the warranties you are giving?
- Have you made full disclosures in the disclosure letter?
8. THINK BEYOND THE FIRST ROUND
Early investment isn’t just about closing this round; it’s about building a foundation for the future. Decisions made now can either smooth the path to future funding, or create barriers.
Points to consider:
- Future rounds: is your ownership structure clear and simple enough to support follow-on funding?
- Founder alignment: are roles, restrictions, and exit expectations clear among the founding team?
- Exit planning: investors will want to know how they’ll eventually see a return — even at seed stage.
Founder’s checklist:
- Could your current ownership structure support larger investors later on?
- Are all founders aligned on their roles and responsibilities?
- Do you have a shared understanding of the likely exit route?
9. TIMELINE EXPECTATIONS
The process of raising investment varies. A small seed round between friends and family may be completed in a few weeks; a larger round can take months. Timescales depend on the complexity of the deal, the number of investors involved, and how well-prepared your documents are.
Final thought
Raising equity investment can be one of the most rewarding (and stressful) steps in a company’s journey. The process is rarely quick, and it often distracts founders from running the business. But time invested in getting legally “investment ready” pays dividends: it inspires confidence, reduces friction, and helps you secure the right deal on the right terms.
At Murrells, we take a commercial approach to early-stage investment work. We understand that founders need practical, cost-effective legal support that moves deals forward rather than creating unnecessary complications. Whether you’re preparing for your first fundraise or negotiating with institutional investors, our team can help you prepare, avoid the common pitfalls, and secure terms that support your long-term goals. For more information, please contact Henry Maples or Luke Smith in our corporate team, who would be happy to help.
