The Pre-Seed round is the first serious stage of startup funding, where an idea receives financial support from so-called "angel" investors, friends, family, or early-stage funds. Properly preparing documentation at this stage is critical, as it lays the foundation for the company's future capital structure (Cap Table). Improperly structured investment can lead to excessive founder dilution in the future or hinder the entry of major venture investors in subsequent rounds. Specialists on the Legal.ge platform help ensure that your first investment is legally sound, protects your interests as a founder, and is attractive to investors.
What Does Pre-Seed Round Documentation Cover?
Legal.ge lawyers provide full legal support for the investment process, which includes:
- Preparation of Term Sheet: A non-binding document summarizing key investment terms: Valuation, investment amount, equity stake, and governance rights. This is the main negotiation tool.
- Investment Agreement: The primary legal document regulating the conditions for transferring shares in exchange for money, Warranties, and party liabilities.
- Updating Shareholders' Agreement (SHA): The entry of a new investor requires modifying the existing agreement to reflect the new partner's rights (e.g., information rights, veto rights on certain issues).
- Cap Table Management: Lawyers will help you correctly calculate how percentage stakes will change after the investment and how this will affect future rounds.
- Corporate Resolutions: Preparation of minutes and resolutions of the partners' meeting, necessary to register capital increases and the issuance of new shares.
Real-World Scenarios When You Need This Service
Pre-seed documentation is essential when:
- Receiving Money from an Angel Investor: An individual investor puts money into your idea. They need a guarantee that their investment is officially reflected in the company's capital.
- "Family & Friends" Round: When relatives provide funds, relationships are often informal, which is a mistake. Legal formalization protects personal relationships from financial misunderstandings.
- Joining an Accelerator: Many startup accelerators require equity in exchange for investment. To execute this transaction, you will need a standard package of documents.
- Issuing Convertible Debt: If you cannot agree on the company's valuation, you might use instruments that convert into equity later (although this can be a separate service, it is often part of the pre-seed round).
Georgian Legal Framework and Regulations
Investment transactions in Georgia are regulated by the Law of Georgia on Entrepreneurs. The law defines procedures for capital increase, issuance of new shares, and amending the charter. During a pre-seed round, mechanisms provided by law such as capital increase via contributions, exercise or waiver of pre-emptive rights are often used. Also important is the Civil Code of Georgia, which regulates the contractual aspect. The lawyer's role is to ensure that investment terms (e.g., Liquidation Preference) are compatible with Georgian corporate law and are correctly reflected in the company's charter.
Service Process
Preparation of Pre-Seed round documentation on Legal.ge involves:
- Structure Selection: Consultation on the best form of receiving investment (direct equity, convertible loan, etc.).
- Term Sheet Drafting/Review: Analysis of terms provided by the investor or preparation of your own offer.
- Full Package Preparation: Drafting all necessary contracts and corporate resolutions.
- Negotiations: Lawyer involvement with the investor or their legal team to agree on details.
- Closing: Signing documents, monitoring fund transfer, and registering changes in the Public Registry.
Why Choose Legal.ge?
Raising investment is a stressful process. On Legal.ge, you will find lawyers who understand the language of startups and the specifics of venture capital. Our specialists will help ensure the process goes quickly, without delays, and most importantly — safely for your business's future. Trust the professionals and focus on growth.
Updated: ...