Caufield & James, L.L.P Caufield & James, L.L.P

Serving clients in Hawaii and throughout California, including Sacramento, Fresno, San Francisco Bay Area, Los Angeles, Bakersfield, Chico, Jackson, and San Diego

Call us now toll free:866-585-8944
search Navigation Menu

Issues that cause VCs to say no to funding start-up companies

The entrepreneurial ambitions of business people in California often depend on venture capitalists and VC firms investing in start-up companies. Entrepreneurs typically strive to make their best cases when asking for money, but their efforts might be sabotaged by overlooked issues or even rivalries among VCs that are beyond their control.

A capitalization table represents a spreadsheet record of a company's previous financing rounds. While problems with this information might turn off an otherwise interested VC, an entrepreneur could take steps to improve the appeal of a cap table. Updating the document prior to every meeting could provide potential investors with a complete picture. It should display all funding rounds and equity grants. Employees also need to be on a vesting schedule and the cap table needs to account for anyone who has equity. Existing ownership issues might be more difficult to correct. A VC, for example, will not want to see someone who received an excessive share of a company after a small investment.

Overly high company valuations could discourage a VC as well. High valuation means that investments will produce smaller shares of ownership. A high valuation could also endanger the next funding round. VCs will want to see well-researched valuations based on reality.

A legal evaluation of presentation materials, valuation calculations and investment terms could help an entrepreneur spot problems prior to meeting with VCs. An attorney familiar with business formation and planning could offer insights about regulator compliance and suggest strategies for designing attractive terms that meet goals for all parties. An attorney could advise a person about how to structure ownership and evaluate funding proposals. Services such as negotiation management and contract writing provided by an attorney could alert the person to hidden liabilities and result in agreements that promote a start-up company's success.

No Comments

Leave a comment
Comment Information

Contact us now to begin a confidential case evaluation:

Caufield & James, L.L.P

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

[an error occurred while processing this directive]