For matters regarding the investment process, founders need to get help from experts.
The role of investment in a startup is so big, to the point that when we hear those two words juxtaposed in one topic, we immediately recognize that there is “money talk” in the conversation. So, but how can we get investment?
Usually startup activists rely on venture capital to get investment from financial institutions or individuals who have high financial capacity to invest shares in your startup. This is where you need to make an agreement and important data that supports the continuation of the agreement between the two parties. Therefore, sometimes many startup owners use lawyers or lawyers to help provide them with legal guidance.
The problem is, there is another opinion regarding this, namely the costs that must be incurred when working with a lawyer, especially a startup that has just been established does not necessarily have that much funds to continuously use the services of a lawyer.
For this, you can manage the investment process together with your investors based on commonly used documents (for example: SAFE and KISS) which are quite simple.
However, sometimes there will be agreements that are not regulated in the SAFE and KISS format, which often requires you to pay attention to the risks and effects on your startup. Well, here it turns out that a legal role is needed. Because even if only one party will use the services of a lawyer, the duty of the lawyer handling this investment is to pay attention to whether there is discrimination or violations in this investment agreement.
The question is, what can a lawyer help you with in the venture agreement process?
1. Term Sheet
When you get an investor, he will give you an agreement and the terms usually used, which is also called a term sheet. Here, the role of a lawyer in your startup is to reiterate the terms in the legal realm, help negotiate, and check the validity of the terms given.
Usually startups use the services of lawyers to minimize the risks of agreements determined by investors. After that, the lawyer can also help startup entrepreneurs find the most optimal way to arrange the agreement between the two parties and find the most appropriate investment instrument.
2. LDD (Legal Due Diligence) and VDD (Vendor Due Diligence)
Due Diligence is used to obtain material information and facts about a business. LDD is used by investors as part of a deal, while VDD is used by startups before a deal is made.
In the initial stages, these documents are used for matters relating to company identity and intellectual properties, but in the future, these documents can be used for other things, such as helping investors monitor relationships with key personnel, agreements with clients. clients, and agreements in previous investments.
Due Diligence is also related to the Term Sheet. If you decide to use the services of a lawyer, your lawyer will help you to rearrange all existing agreements so that in the future, this investment will not harm your startup.
3. Investment Documents
All investment documents are usually provided by investors, according to the conditions they want to provide to startup owners. Other documents, such as startup permits, agreement contracts, etc.
So, not only the Term Sheet, LDD and VDD can be supervised and assisted by a lawyer, but other documents can also be handled by a lawyer and assisted with the negotiation process.
Based on the pros and cons that have been explained previously, as well as the functions of lawyers that we have discussed previously, have you considered using the services of a lawyer in your process of looking for investors?
The National 1000 Digital Startup Movement is a hand-in-hand effort to mobilize the Indonesian digital startup ecosystem to connect with each other, share knowledge and experience.
Initiated in 2016, this movement is expected to encourage the creation of startups that provide solutions to problems by utilizing digital technology. #1000StartupDigital provides coaching for prospective founders to form a team, create an MVP, and launch their product to the market.
