1. Tidy up commercial issues in advance

Before entering into negotiations, make sure that all potential commercial issues have been identified and, where possible, dealt with. This includes issues such as making sure that all intellectual property rights are actually held by the company; that all customers have license agreements in place; that key suppliers are contractually bound, etc.

2. Know where you want to go and who with

Know what your long term plan is and what investors at this stage best fit into that plan. Investors and founders are entering into a long term relationship, and like all relationships they should be mutually complementary. Investors should fit both with the enterprise now and with its long term goals (whether that be for future funding, foot-holds in other markets or otherwise).

3. Keep it simple

Complex deals can lead to misunderstandings between the parties, take longer and cost more to implement, and dissuade future investors from coming on board. It benefits everyone to keep the deal simple.

4. Agree the outline

Before committing to the agreement, make sure that you have agreed the outline of the deal in advance in sufficient detail including all the key commercial points detailed above, and record this agreement in writing (this is often called a “memorandum of understanding” or a “heads of agreement”)

5. Implement quickly and don’t seek to renegotiate

Delay in implementation and/or re-opening negotiations sours relationships and can cause investments to fall apart. While some slippage and minor variations in terms is to be expected, any long delays and/or fundamental changes should be avoided.

Disclaimer
This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Leman Solicitors for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.