Before a Series A, founders should cancel all unvested, expired, or unexercised options, resolve any outstanding promissory notes or SAFEs with ambiguous conversion terms, and ensure all equity is properly documented in a cap table management system. Lead investors will scrutinize the cap table in diligence, and any discrepancies between legal documents and reported ownership can delay or derail the closing.
The single most common source of Series A delay is cap table disorganization. Founders who raised on multiple SAFEs at different caps, with different MFN provisions and different pro rata terms, often discover at Series A that the conversion math does not produce the ownership percentages they expected. In Gurpreet Bal's practice at Foley and Lardner, he recommends founders run a full conversion waterfall analysis at least three months before approaching Series A investors, modeling different pre-money scenarios to understand the range of outcomes for founder ownership post-close.
The most fatal IP gaps are missing or incomplete invention assignment agreements from early contractors, co-founders who left without signing IP transfer documents, and open-source code incorporated into the product under licenses that impose copyleft obligations. Investors and their counsel will specifically look for these gaps, and unresolved issues can result in escrow holdbacks, price reductions, or failed deals.
Series A investors will diligence your IP chain of title. Every founder, employee, and contractor who has contributed to the company's technology needs to have signed a proper Confidential Information and Invention Assignment Agreement (CIIAA). The most common gap Gurpreet Bal sees in practice is a co-founder who contributed to the codebase before the company was formally incorporated and never executed a proper IP assignment to the company. Fixing this retroactively is possible but time-consuming and can delay closing if discovered during diligence.
Founders should obtain a fresh 409A valuation before issuing any stock options if the prior valuation is more than 12 months old or if a material event has occurred — such as closing a seed round, signing a significant revenue contract, or achieving a major product milestone. Issuing options without a current 409A creates cheap stock risk, which can trigger IRS penalties and complicate Series A diligence.
A current 409A valuation is required to issue stock options at a defensible exercise price. If your last 409A is more than twelve months old, or if a material event has occurred since the last valuation such as a significant SAFE round, revenue milestone, or change in business model, you need an updated 409A before issuing new option grants. Series A investors will ask when your last 409A was obtained and whether any options were issued at prices that may be below fair market value. Gurpreet S. Bal advises founders to obtain refreshed 409A valuations proactively rather than scrambling to get one during the Series A process.
The standard Series A board is five members: two founders, two investors (including the lead Series A investor), and one independent director. The lead investor will typically require a board seat as a condition of investment, and most term sheets will specify board composition. Founders should understand that the Series A board gives investors significant governance rights, including approval rights over major company decisions.
Series A is typically when a startup transitions from an informal governance structure to a formal board of directors with investor representation. The standard Series A board composition is two founder seats and one investor seat, sometimes with a provision for an independent director. Protective provisions giving the Series A investors veto rights over certain company actions such as additional equity issuance, incurrence of debt, changes to the certificate of incorporation, and related party transactions become standard. Gurpreet Bal advises founders that the governance structure set at Series A tends to persist through subsequent rounds, making it critical to negotiate these terms carefully from the outset.
In Gurpreet's experience, the 409A problem is almost entirely solved by two simple habits. First, calendar an annual 409A refresh — same time every year, no exceptions. Second, get a new 409A at the next regular board meeting after any financing closes. If you do those two things consistently, you will never find yourself scrambling for a valuation during a Series A process. Good counsel will flag both triggers automatically. If yours is not, that is worth noting.
Gurpreet S. Bal is a Partner at Foley and Lardner LLP in Silicon Valley, where he advises startups, founders, and investors on SAFE financings, venture capital rounds, mergers and acquisitions, acquihires, and IPOs. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology.