THE FINE PRINT OF RAISING CAPITAL WITH KEVIN VELA – EP. 30
Updated: Jun 1, 2022
What if you built and sold a multibillion-dollar company, only to get a cheque for several million dollars, or worse, only a few hundred thousand? Believe it or not, this could happen. It can be the result of not navigating their company through the stages of financing properly.
Kevin Vela, founding partner of Vela Wood, joins us to discuss the ins and outs of working with your lawyer and properly financing your company. Vela Law is a boutique corporate law firm that focuses on M&A, private equity, and venture financing.
Part of Kevin’s work is to make sure his clients avoid the painful mistakes of improperly raising capital, particularly at the early stage. Kevin speaks with such passion and in-depth knowledge of his field. He gives a wealth of insights into the legal processes that all founders and financiers must go through during a venture deal.
Some of the key takeaways are his advice for what founders need to provide before seeking financing, and what they should look out for to make sure they maintain a reasonable share of their company as they grow.
KEY POINTS FROM THIS EPISODE:
What to look for in a lawyer or accountant: the correct legal and industry experience.
The value of having a clean corporate history as far as documents go when raising capital.
The fact that all founders will lose control of their company once it hits a certain size.
Shifts in chains of authority and how investors protect themselves.
How terms given up in a seed round give way to further sacrifices at the next round.
Standard protective provisions for investors that founders need to be aware of.
How to avoid being gutted by liquidation preferences: having an attorney, a model, and more.
Typical phases of dilution a founder can expect through each round of financing.
Things that scare off VCs: obstacles from poor financing at earlier stages.