8 Ways Florida Start-Ups can Prepare for Fundraising
Florida Start-Up Fundraising: How to Attract Investors
Finding investors for fundraising is one of the biggest challenges faced by start-ups in Florida. It can be a frustrating paradox – your business is still in its early stages, but it needs to project a certain level of professionalism and organization to really attract major capital. Here are a few areas to focus on before meeting with investors to ensure that you have the best possible chance of walking away with a good deal.
Proper Entity Election
While limited liability companies (LLCs) are especially popular among start-ups and other first-time business owners in Florida, they aren’t the best structure for attracting investors or fundraising. Corporations – specifically C Corporations – will have more luck in this area. There are two main reasons for this. First, it’s easier to transfer ownership in a C Corporation than with an LLC or S Corporation. Second, C Corporations have a more standardized management structure as opposed to the highly customizable LLC. Start-ups trying to catch the interest of investors should either incorporate as a C Corporation from the start or convert their LLC to a C Corporation when the time is right.
Foreign Qualifications for Other States
When you register your start-up with the Florida Department of State’s Division of Corporations, you only register to do business in this specific state. This is fine for most businesses, but investors place a lot of value in a business’s growth potential, which means expanding beyond Florida’s borders. Doing so requires filing a “foreign qualification” with every state that you plan on conducting business, even if you don’t maintain a physical presence there. Each state has its own specific requirements to be met, so make sure to research them closely – or think about hiring an attorney – before filing.
Confidentiality and Assignment Agreements
Too many start-ups underestimate the importance of non-disclosure and other confidentiality agreements. These contracts are the foundation for safeguarding intellectual property (IP). They also help keep proprietary or otherwise confidential information within the company. Employees, consultants, independent contractors – basically anyone who has access to your business’s trade secrets should sign an NDA. This applies to potential investors as well. You should also consider IP or Invention Assignment Agreements if you employ any coders or other creatives who might try to claim ownership of the works produced for your business on company time.
Trademark Registration & Branding
Trademarks are synonymous with establishing and protecting your company’s brand. They help attract the public’s attention, as well as that of prospective investors. While trademarks are available at both state and federal levels, you’ll need to a federal trademark registered with the United States Patent and Trademark Office (USPTO) if you want to enforce your rights nationwide or to send takedown notices on social media. The application process can be difficult for the inexperienced, and there are no refunds upon rejection. That’s why we recommend enlisting a trusted attorney to help you when seeking a trademark.
Capital Structure & Equity Agreements
Your start-up’s capital structure – or equity structure as it’s sometimes called – is the fusion of debt and equity that funds the business’s growth and ensures its continuity. When fundraising, it proves that your company is a worthwhile investment. This is a comprehensive strategy that encompasses a lot of different areas of focus, so be sure to bring it up with your CPA. Before meeting with your accountant, however, you should familiarize yourself with Equity Agreements and Equity Incentive Plans, as well as Section 83(b) election requirements.
Employment and Independent Contractor Agreements
Verbal agreements might seem like a more convenient alternative to written contracts in the moment but can lead to trouble down the line. This increased risk of liability discourages outside investors. Not only are the terms of a verbal contract almost impossible to enforce in a court of law, but they can lead to accusations of employee misclassification if you also hire independent contractors. Get your agreements in writing and keep them on hand, no matter how much you trust the other party. Both employment agreements and independent contractor agreements can get highly detailed depending on the job, and a lawyer’s assistance with drafting yours is advised.
A Dedicated Website & Online Agreements
Clear & Consistent Recordkeeping Practices
This one is easy to overlook. When you’re focused on running a business, you probably aren’t too concerned about maintaining your corporate documents beyond having all the legally mandated paperwork. However, you absolutely must get your recordkeeping in order before meeting with investors. Make sure your articles of incorporation, bylaws, meeting minutes, employment agreements, and all other important documents and contracts are secure and easily accessible. A secure cloud storage service can be useful for these purposes.
For help establishing a business entity that will attract the investors you need to take your company where you want to go, visit our firm’s consultation page or call (727) 279-5037.