Exploring Secondary Sales: A Strategic Move for Founders
Raising capital is a defining milestone for any high-growth startup—but it’s also one of the riskiest.
Having advised hundreds of ambitious founders, we’ve seen consistent patterns in where things go wrong. These mistakes are rarely due to lack of ambition or innovation—they’re almost always legal or structural.
Here are five of the most common missteps we see founders make during the fundraising process—and how to avoid them.
Too many founders rush into raising capital with only a pitch deck and no structured legal plan. Without a clear understanding of instruments like SAFEs, convertible notes, or equity rounds, they can inadvertently agree to terms that limit future growth or scare off later-stage investors.
How to avoid it: Engage legal counsel early—ideally when preparing the term sheet. A sound strategy helps protect your position and sets the tone for future rounds.
We recently worked with a founder who was negotiating with a high-net-worth investor used to property deals. The draft term sheet included fixed returns, personal guarantees, and a clause prohibiting dilution of their shareholding...ever! —completely unsuitable for startup financing.
How to avoid it: Founders should lead the conversation. A founder-led, legally-reviewed term sheet protects both parties and ensures alignment with industry norms.
Early-stage founders sometimes accept low valuations in exchange for quick capital. Later, e.g. when raising a Series A, they find themselves overly diluted, leaving little room to incentivise the team or attract further funding.
How to avoid it: Model your cap table forward. Understand what today’s equity decision means for tomorrow’s financing rounds—and your long-term ownership.
Founders are often so focused on impressing investors that they forget to do their own homework. Not all investors are aligned with your growth strategy—and some may bring more trouble than value.
How to avoid it: Treat investors like long-term partners. Ask for references. Understand their typical deal structures, involvement level, and expectations. A bad investor fit can create legal and operational friction later.
It’s tempting to think the hard part is over once the money hits your account. In truth, fundraising is just one piece of a much larger puzzle—product-market fit, team, compliance, and growth strategy all remain ahead.
How to avoid it: Use your legal team not just to close the round, but to think ahead. Build a winning team. Protect your IP. Prepare for the next stage.