There comes a time for many businesses when a financing is required or would help accelerate or achieve business objectives. In my experience as a founder raising financing, there was that moment of truth, when I revealed what was underneath. Having been on the investor side, that moment had a different energy, a hunter mentality. But as a founder, even as a trained corporate lawyer and MBA, there was a particular feeling of anxiety and exposure as I engaged more deeply with investors.
That moment, the first deep look under the hood, is what this post is about.
- What Investors Are Actually Looking For
At this stage of the deal, sophisticated investors conduct due diligence to confirm their investment thesis. On the deal side, they want a defined legal package – subscription agreement, term sheet, and core corporate documents. On the business side, they want to understand what drives value — the underlying technology, the production and supply dynamics, or the magic behind the marketing pull. But the documents are not the story. They are the evidence of the story. Investors are reading them to understand how the company was built, and by whom.
- What I Learned Sitting on the Other Side of the Table
After leaving Bay Street I ran my software company for years before selling to a private equity-backed competitor. During that time my co-founders and I were active angel investors and advisors, and co-founded or helped co-found several other companies — one of which was sold, one of which we took public through a reverse takeover.
At the table as a founder, as an investor, and as a CEO – the core legal work is familiar, but the strong lawyers understand business and nuance. I remember sitting across the table on an LOI where the investor’s counsel kept pushing for provisions that weren’t relevant to the business – allowing us to concede in favor of gains in other areas. A lawyer who doesn’t understand the business model negotiates at a disadvantage — and that gap tends to show up at the moments that matter most.
III. What You Are Actually Buying When You Hire a Lawyer
Most founders think they are buying documents and document reviewers. They are not. They are buying:
- Experience — especially important for first-time founders, knowing which terms to push back on, understanding the context of a financing and its cap table effect, thinking about the company not just now, but as it grows with each successive financing or transaction. This is where business savvy and industry experience are critical factors.
- Institutional memory — the value of having a relationship with your lawyer is that you have someone who understands your business, your cap table, your shareholder dynamics, and your board. This is fundamentally different than parachuting in counsel to close a single transaction – and the advice reflects it.
- Network — not every lawyer will be able to handle every matter – but a lawyer should bring with them a strong network of expertise and an understanding of when to access it. This can open doors, or vet and guide decision-making.
- Founder focus — this one rarely gets discussed. A lawyer who has actually built and sold a company understands what it feels like to sign a document that changes your life. Founders who succeed understand that a trusted lawyer is a competitive advantage.
- The False Economy of Cheap Counsel
Flat fee packages certainly have their place. Anything that is more routinely transactional, with tightly defined scope, such as a simple incorporation, an NDA, or a contract review makes sense. This is more so the case if you are familiar with these processes, and much less so the case when you are doing something for the first time.
An early financing is not a form-filling exercise. Usually something has been built by the time you are raising your first serious amount of financing and there is enormous variability in the steps taken, or not taken, and the potential complexity. A common scenario is a team or board change – when the team that brought the company to this stage will be different than the team moving forward with the next stage.
Cost is a real constraint for early-stage founders, and the instinct to manage it is understandable. But by the time a serious financing is on the table, the business has real value – and founders who choose to underinvest in legal at that stage typically encounter the bill later, on a compressed timeline, with investors watching. As the stakes get higher, the cost to fix avoidable problems dwarfs what proper advice would have cost up front.
Flat fees cover an expense. Building a relationship with your lawyer is an investment.
- What the Right Relationship Actually Looks Like
The right lawyer is the one who can provide the deal, business and legal context up front, ask the right questions, and prioritize the path forward. This becomes the lawyer you call on instinct because you know they will understand your situation and provide personalized, calibrated advice.
Having been a founder, an investor, and a CEO, when I moved into legal counsel, it was precisely because I had learned what the right legal relationship looks like. Each business is a unique, growing story, and your legal counsel should be a partner as you navigate each new chapter.
- The Next Step
Whether you are seeking investment or already have investor interest, the most valuable thing you can do before advancing those discussions is to have a candid conversation with counsel. The goal isn’t to start drafting. The goal is to have a professional assessment of where you stand, what the priorities should be and what investors will see when they look under the hood. If you’re at that stage, or approaching it, I’m happy to have that conversation — no agenda, just an honest look at where things stand.
Deals that close cleanly and quickly are the ones that have done the prep in advance. They are the ones that built a business, and invested in the relationships that matter. Your lawyer should be someone who understands not just the law, but the journey.
Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. It should not be relied upon as a substitute for professional legal counsel. Laws and regulations may change over time, and the application of any legal principle will depend on the specific facts and circumstances of each matter. Readers are encouraged to consult with a qualified lawyer before acting on any information contained in this article.
