When you think about the risks that could threaten your startup’s survival, you probably think about the product, the team, or cash flow. But some risks grow quietly (at first) while you go through key moments in your company’s life: the legal risks you don’t know you don’t know.
And although it may sound like wordplay, it’s actually what makes them truly dangerous. Because you don’t realize you’re in a critical situation until, perhaps, it’s too late. That’s why the best approach is to anticipate and prevent them.
Legal risks you don’t realize you’re taking
Some of you may be legal experts, so you already have a head start. But usually, startup founders are not legal specialists and can’t detect problems that originate from early-stage decisions.
Some of the most common examples are:
- Signing generic shareholders’ agreements (or not signing them at all)
- Distributing equity without thinking about the future cap table
- Hiring external professionals without regulating code ownership
- Registering trademarks and domains personally instead of under the company name
- Using third-party contract templates that don’t reflect your processes, needs, or legal requirements
None of these mistakes need to be dramatic… until they become a serious problem.
Legal foundations are part of the product
A startup without solid legal foundations is like a house with no structure. You can grow fast, raise funding rounds, and hire talent. But a change in a partner, a conflict with the CTO, or a data protection inspection could shake everything up.
And here’s the catch: most of these problems are invisible until they explode. There are no warning signs. You only notice them when they stop you in your tracks.
The urgent overshadows the important
In daily operations, legal issues often seem secondary. But ignoring them doesn’t make them go away. On the contrary: the more you grow, the harder and more expensive they are to fix.
That’s why many founders arrive at funding rounds or investor deals convinced everything is under control, and the due diligence process reveals surprises like:
- All software development was done by a third party without any signed documentation transferring intellectual property rights
- Poorly drafted contracts or missing IP and data protection clauses
- Outdated cap table with unregistered convertible notes
- Incomplete privacy policies or copy-pasted ones, lacking key authorizations or data processing information
- Founders haven’t signed service contracts with the company
- Founders’ remuneration hasn’t been approved by the general shareholders’ meeting
- No up-to-date minutes or shareholders’ books (e.g., missing shareholder email addresses)
All of this delays deals, creates mistrust, or directly causes investors to walk away.
What can you do today?
Ask yourself these quick questions:
- Does your startup own the source code and trademarks or the domains it uses?
- Are the shareholders’ agreements signed by all partners?
- Does the cap table accurately reflect reality and is it easy to manage or is it a nightmare?
- Do you have contracts with confidentiality and IP clauses for all employees and vendors?
- Do you comply with GDPR and have signed data processing agreements?
- Is the contractual relationship and remuneration of founders and executives properly regulated?
If you’re unsure about any of these, that’s already a clue where to begin.
Being prepared avoids unnecessary setbacks
Keeping your legal affairs under control not only brings peace of mind, it also prevents surprises if you later decide to raise funds, sign a key agreement, or even sell your company.
At Metricson, we’ve helped hundreds of startups identify and resolve these risks before it’s too late.
That’s why we recommend performing a red flags due diligence or self-diagnosis, especially for founders and management teams of growing companies, to detect key legal risks and implement control mechanisms that maximize company value for future investment or acquisition deals.
If you want to know more about this self-diagnosis report, you can read more here.
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About Metricson
Metricson is a pioneering law firm specializing in legal services for innovative and tech-driven companies. Since its founding in 2009, it has advised more than 1,400 companies from 14 different countries, including startups, investors, large corporations, universities, institutions, and governments.
If you’d like to get in touch for any legal advice, feel free to write to us at contacto@metricson.com. We look forward to hearing from you!