Elise Patelet is a Lawyer and Senior Partner at Harvey law firm. She has – discreetly – supported many startups in their fundraising journey in Luxembourg, including significant rounds managed by well-known women founders. As one of the most experienced law professionals in the tech ecosystem, she will be sharing her valuable experience at the Women Founders conference organised by WIDE on the 24 of November at the House of Startups.
You support many entrepreneurs in their fundraising efforts. Can you share with us a checklist for a successful round of financing?
There is no standard checklist, but I would say the most important thing to take care of from a very early stage is the general legal structuring of a project. This includes contractual relationships with the clients, suppliers and co-founders. Initial legal structuring (legal forms, corporate documentation, contracts, labour law…) can make the difference later. Anticipation is key. All documentation has to be ready and organised from the time an entrepreneur starts to pitch his/her project to a potential investor.
The founder(s) can succeed in their financing round and increase their valuation, especially at the due diligence stage. I see legal conformity as a real asset in any transaction. Indeed, it seems very risky for investors to participate in projects where intellectual property assets are not protected or well-managed. This applies to existing business contracts and their conditions (early termination rights, payment conditions).
A well-framed legal system is essential to ensure a smooth closing of a fundraising round.
It will later help ensure a good negotiation of terms sheets with investors. It’s important to mention that many entrepreneurs tend to forget that this initial document sets the general conditions of the deal. Being able to raise funds is good news, but it is important to be assisted by an advisor or lawyer in order not to set too strict conditions. This will serve as a base to the future shareholder agreement.
A good project starts with a good shareholder agreement. Can you also tell us the mistakes to avoid and the key points to mention?
The first mistake is to keep this for later, especially between co-founders, as it’s not usual to see initial team members leaving sooner than initially planned.
A shareholder agreement is the foundation stone. Every founder needs to protect his/her interests through his/her daily involvement in the operational management, thus ensuring sufficient control of the company’s share capital. I would recommend checking, in particular, for specific conditions/clauses such as bad leaver clause, opt-out clause, veto rights.
The document also translates the right level of balance between the operational rights of the entrepreneur and the financial rights of the investors, who are taking on most of the financial risks. It’s important to protect your position in the company and ensure that you will still have the freedom of being an entrepreneur.
You have also been supporting women entrepreneurs for a long time. Is there really a difference in business projects carried out by women compared to men? Are they more difficult to raise funds for or is it a label that should be removed once and for all?
Yes, I have been involved and I’m still involved in several projects led by women entrepreneurs. I have to admit that they are a minority in all the deals I have seen and are virtually absent on the investors’ side.
The type of projects is often different, women are more committed to impact ventures. Excellent leadership and strong values are often key drivers for them. Women entrepreneurs are a real inspiration to me!
Being a woman in business is not easy, especially when you have to deal with your family at the same time. I have clearly noted that women entrepreneurs have to work harder to raise funds. They are not always taken as seriously as they should when talking to investors. Most of them do not dare to talk about it openly, but since I have the chance to work closely with them for a long period of time, we can have this kind of conversation.