29 Equity (SAFEs) or similar instruments, to finance activities that will allow the start-up to enhance track record and market validation. Early-stage startups should also consider pre-seed financings, in the form of Simple Agreements for Future Equity (SAFEs) or similar instruments, to finance activities that will allow the start-up to enhance track record and market validation. That being said, in many cases, founders do not fully comprehend the dilution effects of such instruments upon their conversion into shares in the framework of an equity financing. To avoid unexpected dilution, legal counsels should ensure that the company and the founders fully understand the terms and effects of such instruments, and even provide the simulations to illustrate such effects.” Strong team, scalability and product development milestones Tzahi at OurCrowd adds: “Investors prioritize startups with a capable and experienced team. Investors also seek evidence of market demand, potential for growth, and scalability and assess the start-up’s product or technology for innovation, differentiation, and defensibility. Other factors include evidence of early traction, such as revenue growth, partnerships, or product development milestones, and a scalable business model that outlines revenue streams, pricing strategy, and path to profitability.” Adam at Dechert agrees: “Key factors include the business having a scalable project in a market which offers exponential gains. Investors can see the way in which progress can be made so that the business can achieve milestones to make it attractive for larger investors in Series A and higher level rounds.” Another major factor is having “a management which is driven and focused on the outcome, communication skills in English which are at the level of native speakers, good financial skills, transparency on reporting and, perhaps the most underrated factor of all, luck.” Roy Caner, partner and head of Hi-Tech department at EBN: ”The factors that contribute to the startups’ success in securing financing are (in addition to the sector) the strength and background of the founding team and avoiding mistakes that relate to the ventures’ IP. Legal counsel can assist in providing good advice and making sure that the founders do not act impulsively and make such mistakes as well as in making sure that the company is advised, and its legal documents are in full order since inception and even before.” Maya at the HTA added: “First and foremost are the team members but also they will need proven product market fit and great technology. Legal can help first time entrepreneurs to avoid making mistakes they will regret down the road.”
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