Before a seed round, a US startup should be able to produce a clean formation file, complete founder equity and IP paperwork, a current cap table, the necessary board or stockholder approvals, and the actual financing documents. Investors will also expect the company's employment, contractor, and material commercial agreements to match how the business really operates. The exact package depends on the entity, financing route, and state, so founders should use this as a readiness checklist and have qualified counsel review the transaction.
Educational information only. This is not legal or tax advice.
Start with a complete formation file
A filed certificate of incorporation proves that the corporation exists, but it is only the first document in the file. A fundraise-ready company should also be able to find its bylaws, incorporator action, initial board consent, federal tax ID record, registered-agent information, and any state qualification records.
The Delaware Division of Corporations separates formation into concrete steps: choose the entity type, appoint a registered agent, prepare the certificate, submit it for filing, and maintain later annual reports and franchise-tax obligations. The state also warns founders to get legal or accounting advice when choosing an entity. Filing a corporation and choosing the right corporation are different decisions.
After formation, record the initial organizational actions instead of relying on email or memory. Those actions usually establish the board, adopt the bylaws, authorize founder stock, open bank accounts, and approve other early company steps.
Document founder ownership and IP before diligence starts
The founder file should answer four questions without ambiguity:
- Who owns how many shares?
- What vesting or repurchase terms apply?
- Did the company receive the intellectual property used in the product?
- Were the required tax and company actions completed?
Typical records include founder stock purchase or subscription agreements, board approvals for stock issuance, vesting terms, invention and IP assignment agreements, confidentiality agreements, and any applicable tax elections. The IRS publishes Form 15620 for a Section 83(b) election; founders receiving restricted stock should ask tax counsel immediately whether and how the current rules apply to them.
Do not wait until an investor asks who owns the code, model, brand, data rights, or invention. Employees and contractors who built material IP should have signed agreements that transfer the relevant rights to the company. A clean cap table cannot compensate for unclear ownership of the product itself.
Keep one cap table that reconciles to the signed documents
Your cap table should match the actual stock issuances, option grants, SAFEs, notes, warrants, and board approvals. It should not include handshake promises as if they were issued securities.
Before fundraising, reconcile:
- authorized shares against issued and reserved shares;
- founder grants against signed purchase documents and vesting terms;
- every option grant against board approval and the equity plan;
- every SAFE or note against the executed instrument and money received;
- side letters, pro rata rights, or unusual promises against the financing history.
The SEC's startup securities guide explains that stock, SAFEs, debt, options, and other instruments can all be securities with different rights. The cap table is an index of those legal relationships, not a substitute for the underlying documents.
Choose and approve the financing instrument
For an early seed round, the financing file may center on a SAFE, convertible note, or preferred-stock purchase. The right choice depends on the economics, investor expectations, company history, and applicable law.
Y Combinator's current SAFE documents include several post-money forms for US companies and a user guide. YC also says founders and investors should consider legal review, and it notes that the standard forms do not cover every edge case. Using a familiar template can reduce negotiation, but changing it casually can create consequences elsewhere in the cap table.
Whichever instrument you use, keep the approvals and compliance record beside it. The SEC states that offers and sales of securities by private companies must be registered or conducted under an exemption. Its offering-pathways guide summarizes common exemptions, but counsel should confirm which route applies before you solicit or accept money.
Prepare the operating agreements investors will inspect
Seed diligence is not limited to formation and financing. Investors may ask whether the company's day-to-day contracts support the story in the pitch.
Prioritize:
- employee and contractor agreements, including confidentiality and IP assignment;
- option plan documents and grant approvals;
- material customer and vendor contracts;
- privacy policy, terms of service, and data-processing terms when relevant;
- licenses or regulatory permissions required for the product;
- debt, grants, leases, and other obligations that could affect the financing;
- board and stockholder minutes for material decisions.
The goal is not to create a huge data room. It is to make the legal record agree with reality.
A practical pre-seed legal checklist
Before opening diligence, confirm that you can share or explain:
- the filed formation document and current good-standing status;
- bylaws and initial organizational consents;
- EIN record and registered-agent details;
- founder stock, vesting, tax-election, and IP-assignment records;
- a fully diluted cap table reconciled to signed instruments;
- equity-plan and option-grant approvals;
- signed employment and contractor agreements;
- material customer, vendor, debt, and licensing agreements;
- the proposed SAFE, note, or equity-financing documents;
- board and stockholder approvals for the financing;
- the securities-law exemption and filings identified by counsel.
If one of these items is missing, record the gap and owner now. Reconstructing a founder grant or IP assignment after a term sheet arrives is slower, riskier, and harder to explain.
Frequently asked questions
Is a Delaware certificate of incorporation enough to raise money?
No. It establishes the entity, but investors normally need a much broader record covering governance, founder ownership, IP, capitalization, contracts, approvals, and the financing itself.
Can a startup use an online SAFE without a lawyer?
Templates are useful starting points, not a judgment about fit. The instrument, company history, side letters, solicitation process, and exemption from registration all matter. A qualified startup lawyer should review the actual transaction.
When should founders assemble the data room?
Before active fundraising. Build a small, accurate file while the facts are recent, then update it as the company issues stock, signs contracts, hires people, and accepts financing.