What VCs Want to See in Your Legal Stack

(Before They Wire the Money)

You’ve got product traction. Revenue’s picking up. You’re finally pitching serious VCs — and they’re interested. 

And then comes the part founders always underestimate: legal due diligence. 

It’s not just a formality. For most VCs, your legal stack is how they assess risk before releasing capital. One missing document, or one messy equity agreement, can delay your raise — or kill it. 

This isn’t about perfection. It’s about being clean enough to pass the sniff test. Here's what Indian VCs (and their lawyers) actually look for before signing off on a funding round. 

1. A Clean, Current Cap Table 

This is the first document investors ask for — and the first place things often fall apart. Your cap table should: 

● Match your founders’ and investors’ equity exactly 

● Reflect all share classes (equity, convertible notes, ESOPs) 

● Be updated to the latest allotment — with board and ROC approvals done ● Show vesting schedules clearly

Note: If an early co-founder still owns 25% but left 18 months ago — expect pushback. 

2. Shareholder and Founders’ Agreements 

These aren’t optional. If you don't have them in place, it signals chaos. 

Founders’ Agreement should include:

● Roles and responsibilities 

● Equity vesting and exit terms 

● IP assignment 

● Deadlock and dispute clauses 

Shareholders’ Agreement (SHA) should cover: 

● Existing investors’ rights 

● Exit provisions 

● Transfer restrictions 

● Board structure 

Don’t wait for the VC’s lawyer to draft this. Having your base SHA ready shows you’re serious. 

3. IP Ownership (Not Just a Google Drive Folder) VCs want to know the startup owns what it builds — code, content, brand, all of it. You’ll need: 

● IP assignment agreements signed by founders, employees, and freelancers ● Trademark filings (for brand names, product names, logos) 

● If applicable, copyright or patent applications 

● Proof that vendors or dev agencies have transferred IP 

If your codebase was built by a third-party agency and there’s no signed transfer, investors may pause — or ask you to clean it up before closing.

4. Contracts: Clients, Vendors, Team 

You don’t need a room full of paperwork. But you do need signed contracts in these categories: ● Client MSAs (Master Service Agreements) or SaaS contracts 

● Employment agreements for full-time team members 

● Contractor/freelancer agreements (especially devs and designers) 

● NDAs and IP clauses where relevant 

● Data protection policies (especially if handling user data or client PII) Investors don’t just want to see traction — they want to know it’s legally enforceable. 

5. Compliance & Filings 

VCs want to know: Are your basics in order? 

Make sure: 

● ROC filings are current (especially if you’ve raised before) 

● ESOP plan is board-approved and documented 

● GST, PF, and other registrations are valid 

● You’re not sitting on a pile of unpaid TDS, labour, or tax notices 

It’s not about being perfect. It’s about proving you’re not flying blind. 

6. Due Diligence Folder: Build It Before They Ask 

Don’t wait for the VC’s associate to send a 35-point checklist. Build a clean, organized folder right now with:

● Incorporation docs (MoA, AoA, PAN, TAN, GST) 

● Cap table + share certificates 

● Founder agreements 

● SHA/SSA drafts 

● IP documentation 

● Contracts and policies 

● Regulatory filings 

● Board resolutions and meeting minutes 

● ESOP register 

● Data protection policy + grievance contact info 

Label everything. Use folders. Make it easy to scan. 

What Spooks Investors (and Slows Money)

● Unclear founder equity 

● Unassigned IP (especially code or branding) 

● Unregistered ESOPs 

● Vendor contracts with conflicting IP terms 

● Old ROC non-compliance 

● Surprise co-founders not listed anywhere but “were there from the beginning”

● Lawsuits or legal notices you forgot to mention

Final Word: Your Legal Stack Isn’t Just for the Lawyers — It’s a Signal 

When a VC does diligence, they’re not just checking documents. They’re checking discipline. A clean legal stack tells them: 

● You’re serious 

● You’ve thought ahead 

● You won’t melt down in a high-stakes acquisition or Series B diligence process 

At Lex Certitude, we help startups prep their legal docs, clean up their cap tables, and get investor-ready — without slowing down the raise. 

Want a quick audit of your legal stack before you pitch? Write to us at prashant.thakur@lexcertitude.com 

Legal Disclaimer 

This article is meant for general guidance and does not constitute legal advice. Every funding process is unique, and legal requirements may vary depending on your company’s structure, history, and investor terms. For personalized support, contact Lex Certitude’s legal team.