Madgett LawMinneapolis · Minnesota

Venture Capital Advising

Startup and venture capital legal work in Minneapolis, Minnesota: formation, securities compliance, term sheets, diligence, and exits.

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The expensive problems in a venture deal almost always started years before the term sheet. A co-founder with no vesting. Code a contractor wrote that the company never got assigned. A handshake two people remember differently. When the investor’s lawyers find it in diligence, you’re fixing it on their clock, with a closing date on the calendar.

That’s why I’d rather see a startup at formation, when the equity is being split and the IP is being assigned, than the week before closing.

What we do

  • Formation and corporate work. Forming the company, founder and employee agreements, and getting the intellectual property assigned to the company that’s going to raise money on it.
  • Securities compliance. Selling equity is selling securities, even when the round is friends and family. We work out whether an exemption applies, and what its conditions require, before you take the money, because later investors will diligence that early round.
  • Getting ready to raise. We help with the pitch deck, a targeted investor list, and preparing for investor meetings.
  • Term sheets. We go through the term sheet with you and negotiate it. Valuation gets the attention. Liquidation preference, the option pool, anti-dilution, board seats, and investor vetoes often decide what founders actually receive in an exit.
  • Due diligence. We help you run the diligence process: the legal documents and financial disclosures investors will ask for.
  • Mergers, acquisitions, and exits. Legal counsel on a sale or merger, and planning for an exit, whether that’s an acquisition or an initial public offering.

What to bring

Your formation documents, the cap table, founder and employee agreements, contractor agreements, and the term sheet if you have one. If some of that doesn’t exist yet, that’s where we start.

Talk to us

If you’re raising money or about to, send us a message or call 612-470-6529 for a free consultation. We offer flexible fee structures. Bring the term sheet before you sign it, not after.

Common questions

When should a startup bring in a lawyer?

Earlier than most founders do — ideally at formation, when equity is being split and IP is being assigned. The expensive problems in a venture deal are almost always things that happened years before the term sheet: a co-founder with no vesting, contractor-built code the company never got assigned, or a handshake that someone remembers differently.

Which term sheet provisions matter most?

Liquidation preference and whether it participates, the option pool and whose shares it comes out of, anti-dilution, board composition, and protective provisions that give investors a veto. Valuation gets the attention, but these terms often determine what founders actually receive in an exit. A high valuation with an aggressive preference can pay less than a lower one with clean terms.

Is a term sheet binding?

Mostly not, by design — but not entirely. Provisions on exclusivity or no-shop, confidentiality, and expense reimbursement are typically intended to bind, and courts look at what the document actually says rather than what the parties assumed. Read which paragraphs are carved out as binding before signing, because the no-shop in particular has teeth.

Do I need to worry about securities law when raising from friends and family?

Yes. Selling equity is selling securities regardless of how informal the round feels, and both federal and Minnesota requirements apply unless an exemption is satisfied. Exemptions have conditions about who you can approach and what you must disclose. An early round done casually can complicate every round after it, because later investors will diligence it.

What do investors find in diligence that kills or reprices deals?

Unassigned intellectual property, cap tables that do not reconcile, missing or unsigned founder and employee agreements, contractors who were never converted, and revenue concentrated in contracts that are terminable at will. Almost all of it is cheap to fix in advance and expensive to fix under a signed term sheet with a closing date.

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