Legal Mistakes Startups Make While Raising Funds

Fremont: Several startup entrepreneurs, especially the newbie, are usually found juggling for funds. They try every possible source to raise fund; may be bootstrapping from friends or family, issuing shares, or seeking angel and venture capital; they tend to make some legal mistakes. Below mentioned are few such legal mistakes that startups usually make while raising capital.

Advertising Or Soliciting Investors

Startups should refrain themselves from advertising or soliciting investors. Any advertisement, article, notice or other communications through print media or via electronic media is restricted between the perspective investor and the investee unless there is a substantial and pre-existing relationship between them. Before publishing any such matter, the perspective investor should have a business relationship that is in place prior to the offer sufficient for the issuer to determine that the investor is a suitable one. To be pre-existing, a relationship should  be in place before the terms of the offerings are developed and the offering of securities commences.