Raising capital is a defining moment for any startup, but the groundwork for a successful financing is laid long before you meet your first investor. We’ve seen that the companies best positioned to attract investment are those that have invested in their own structure and governance, team and third-party relationships and documenting it correctly from day one. Here’s our take on how to get your company “financing ready”—and why it matters. 

Why Preparation Matters 

Investors are looking for more than a great idea or a passionate team. They want to see a company that is organized, compliant, and ready to scale. A company with a clean corporate structure, good corporate governance, clear ownership of its intellectual property, and well-documented agreements inspires confidence and streamlines the investor due diligence process. In contrast, a messy cap table, unclear IP rights, or missing documentation can slow down or even derail a deal. 

Step 1: Choose the Right Corporate Structure 

Delaware C-corporations are typically best for high growth venture-backed companies

For high-growth, venture-backed startups, despite some high-profile exceptions, a Delaware C corporation remains the gold standard. Why? C corporations offer limited liability to stockholders, broad indemnification for boards and management, facilitate equity financing, and are familiar to investors. Delaware law provides management-friendly protections, predictable case law, and flexibility in structuring governance and stock. While you can start as an LLC or a non-Delaware entity, and many times that will make sense for early-stage businesses, institutional investors, commercial or strategic partners or your plans to issue equity to employees may require conversion to a Delaware C corporation before investing. 

Key Takeaway: If you’re a high growth company serious about raising venture capital, set up (or convert to) a Delaware C corporation early or work with your attorney to be ready to do so.

Step 2: Build and Maintain a Clean Cap Table 

Who Owns What?

A clear, up-to-date capitalization table is essential. It should show all authorized shares, issued and reserved shares, and the ownership stakes of founders, employees, advisors, and investors.  Any promised equity should be documented. Before a financing, prepare a pro forma cap table that models the impact of the new investment.  Use capitalization management platforms.  Document prior equity issuances properly. 

Equity for Founders, Employees, and Advisors

• Founders: Typically receive common stock and should be subject to vesting. 
• Employees/Consultants: Use an option pool (10-20% for the early-stage company) to grant equity incentives with vesting. Make sure to file timely Section 83(b) elections for restricted stock with vesting. 
• Advisors: Grant equity based on the stage of the company, their role, expertise, and engagement level. Equity grants for advisors are typically much smaller than for employees or founders (think fractional %), should contain vesting, and should be documented with clear agreements. 

Vesting and Repurchase Rights

Implement vesting schedules for all equity holders, including founders. Standard vesting is four years with a one-year cliff, but terms can be tailored (including milestone or deliverables-based vesting). Vesting aligns incentives and protects the company if a founder or key employee leaves early. Consider “double trigger” (acceleration on sale plus termination within a certain  period of time before or after the transaction) provisions for added protection for certain key employees. 

Supervoting Stock and Founder Control

Some high-profile companies use supervoting stock to retain founder control, but this is rare and usually only accepted in competitive situations where founders have outsized leverage. Most startups should focus on balanced governance and clear communication with investors. 

Step 3: Practice Good Corporate Hygiene 

Corporate Housekeeping

Institutional investors will scrutinize your corporate records. Maintain a complete minute book with board and stockholder consents, document all major transactions, and keep up with required state filings. Adopt an equity incentive plan, document all equity grants, and keep your cap table current. Organize your contracts, employment agreements, and third-party agreements in a “living” data room.   Review key customer, vendor and licensing contracts so you know what your rights and obligations are and how they may be affected by your financing. Track licenses to avoid red flags (e.g. GPL contamination, use of confidential information with AI tools)

Why It Matters

Good corporate hygiene reduces liability, ensures compliance, and makes major transactions—like financings, M&A, or IPOs—faster and less expensive. It also signals to investors that you run a disciplined, trustworthy business. 

Step 4: Protect Your Intellectual Property 

Get Your IP Into the Company

Your IP is your “secret sauce.” Make sure all founders, employees, and consultants assign their IP rights to the company. Use robust employment and consulting agreements with clear IP assignment and confidentiality clauses. Don’t wait—get these agreements signed before work begins, otherwise someone else may have rights to that IP and getting it back may get more expensive. 

Common IP Pitfalls

• Founder breakups
• Hidden founders or missing IP assignments 
• Prior employer rights or non-compete issues 
• Trademark conflicts or unregistered marks 
• Unplanned use of open-source software, GPL contamination 
• Public disclosures of IP (like trade shows) before filing patents 
• For online businesses, ensure your privacy policy and terms of service are up to date. 

Non-disclosure Agreements (NDAs) and Commercial Agreements

Every time you work with an outside company, you should first put in place a legal protection that prohibits them from taking or revealing your company’s ideas and inventions.  For initial discussions and sharing of information to determine whether there is a potential commercial relationship to be had, use an NDA.  Use your own NDA forms when possible.  When you are required to use the other party's form, understand what’s in there and what you can try to negotiate and if not, what you can and cannot disclose. 

In your NDAs state the purpose, define confidential information clearly (what's covered and what is excluded), make sure there is both a restriction on disclosure and use other than for the purpose of the agreement, specify return or destruction of materials, and be careful with derivatives and “residuals” clauses and consider the scope and duration of any licenses. 

If the parties determine to work together, you would then move to negotiate a more lengthy and detailed agreement (such as a sponsored research agreement, pilot or joint development agreement) that contains additional scope and rights and obligations than an NDA.  The role of these contracts is to make sure you can collaborate with another company without later regret. 

Step 5: Get Your People in Place 

Employees vs. Independent Contractors

Classify your workforce correctly between employees and contractors—misclassification can lead to legal and tax headaches. Use clear offer letters, employment agreements, contractor agreements and advisor agreements and document all onboarding and offboarding processes. 

Onboarding and Reductions in Force (RIFs)

Have a plan for bringing people on and letting them go. Work with your attorney to develop your employment onboarding and offboarding packages.  Document all employment terms, equity grants, and IP assignments. When making changes, follow best practices to minimize risk, communicate with your team and maintain morale. 

Step 6: Prepare for Diligence

The Data Room

Before you start fundraising, assemble a virtual data room with all key documents: corporate records (charter, bylaws, consents), cap table and documentation of equity issuances, IP assignments, employment agreements, other material contracts (customers, vendors, other IP related agreements), business plan, forecast, financial statements, disputes, if any, tax filings, and more.  Use a customary diligence request list to guide you in populating the data room with relevant documents.  Anticipate investor questions and prepare clear, organized answers. 

Know Your Contracts

Review all agreements for IP provisions, exclusivity, most-favored nations clauses, indemnification obligations, change-of-control provisions, business restriction, assignment clauses, non-competition clauses, termination provisions and other terms that are material to the business, important an investor considering an investment in the company, or could affect a financing. Clean up any loose ends before investors start their review.

Step 7: Make Sure Your Business is Ready

Financial Hygiene

• Books & records: Use proper accounting software (QuickBooks, Xero). Investors expect GAAP-ready books.
• Banking: Have a company bank account (no commingling with personal funds).
• Cash runway: Be clear on your current burn rate and months of runway.

Traction & Metrics

• KPIs: Track metrics relevant to your industry (ARR/MRR, DAUs/MAUs, CAC, LTV, churn, gross margins).
• Customer validation: Highlight early adopters, pilots, or signed contracts.

Team & Advisors

• Key hires: Show you have the right core team (tech + business).
• Advisory board: Consider formalizing advisors with advisory agreements and equity grants.
• Option grants: Have a consistent framework for early employee equity.

Step 8: Think Like an Investor

Investors want to see a company that is ready to scale, with a strong team, clear IP ownership, a clean cap table, and disciplined operations. By investing in your own infrastructure and documentation relevant to your business and your stage, you make it easier for investors to say “yes”—and you set your company up for long-term success.

Our Take

Getting your company ready for a financing isn’t just about checking boxes—it’s about building a foundation for growth, trust, and resilience. It requires both business credibility (metrics, traction, team) and legal hygiene (clean structure, IP ownership, documented ownership of the company, documented third party relationships accessible in a data room).  The startups that attract top-tier investors are those that combine vision and execution with discipline and transparency. At Baker Botts, we help founders prepare for every stage of the fundraising journey, from formation through exit. If you’re gearing up for a financing round, reach out to our team for practical, actionable guidance tailored to your unique path.