From idea to investment: essential legal steps for startup founders

At our inaugural Co-Founder Matchmaking Event, Alexander Gutmans and Christoph Burckhardt from Swiss law firm Walder Wyss shared what they have learned from advising founders across dozens of financing rounds and exits. Both are based in Basel, both specialize in startups, and both spend a significant part of their time guiding young ventures from incorporation to funding and, in the best case, exit.

Their message to founders is simple: think about legal topics as a staged journey, not a one-off task. What follows is a practical overview of five key legal basics they recommend every founder should understand.

Instead of treating “legal” as a single block to tick off, it helps to think of your startup’s legal life as a road with several slopes and bends, or a series of milestones:

• Company incorporation and the initial shareholder structuring
• Drafting shareholders’ agreements, including vesting provisions
• Clarifying IP ownership and licensing arrangements
• Establishing early funding mechanisms (such as convertible loans or equity rounds)
• Navigating subsequent financing rounds and potentially exit scenarios

You do not need to solve everything at once. But you do need to be aware of which milestone comes when, and where you will almost certainly want a lawyer involved.

Equity is one of the strongest incentives you have as a founder. It is also one of the most common sources of conflict.

Christoph recommends that founders think carefully about who holds equity and under which conditions from the very beginning. What happens with a founder’s shares if one of several founders leaves the company early? Or what if a new co-founder joins after incorporation?

This is where reverse vesting (also called founder vesting) comes in. Instead of giving up large equity stakes that are fully locked in from day one, founders can agree to earn their right to keep shares over time – typically over four years with a one-year “cliff.” If a founder leaves early, part of their shares can be bought back and reallocated.

Reverse vesting is not a sign of mistrust. It is a signal that you are serious about fairness and long-term commitment, which is exactly what future investors will want to see.

For many startups, particularly in the biotechnology, medtech and deeptech sectors, their most valuable asset is intellectual property (IP).

Christoph’s advice is clear: don’t leave the question of IP ownership vague or “to be sorted out later.” From the moment you incorporate, ask:

• Who created the IP – you personally, employees, co-founders, or a university lab?
• Does the company own the IP outright, or does it get a license to use it?
• If there is a license, what are the key terms (exclusivity, territory, sublicensing rights, duration, royalties)?

This is particularly important if your technology originates at a university. As Alexander pointed out during the Q&A, universities today typically want to retain ownership of their IP and grant licenses instead of transferring full ownership to the startup.

That is not necessarily a problem – but it must be handled properly, because:

• Investors will look closely at your IP chain of title.
• Weak or unclear IP rights can delay or derail financing rounds.
• Negotiations with universities can take time; starting early helps you avoid bottlenecks later.

The bottom line: make sure your IP is properly documented and aligned with your company’s growth plans before serious investor conversations start.

Once the company is incorporated and basic agreements are in place, most growth-oriented startups quickly face another challenge: how to fund labs, people and infrastructure.

Here, Christoph highlights two dilutive funding options that many founders consider early on:

1. Convertible loan (convertible note): This works well when you need money quickly or your company’s valuation is hard to agree on at an early stage. You receive a loan that converts into equity at a later financing round, usually at a discount. This gives you speed and flexibility and allows you to postpone valuation negotiations.
2. Equity financing round: Investors who finance the company immediately receive shares in return. An equity financing round is more suitable if you already have strong data or traction and can argue for a solid valuation. This involves more negotiation up front, but can give you a cleaner ownership structure and clear investor alignment from an earlier stage.

Regardless of the route you choose, Christoph’s key messages are:

• Establish a realistic budget for the next 12–24 months of your venture.
• Understand the mechanics and implications of each funding instrument.
• Start conversations early, especially in capital-intensive sectors, because it takes time to move from first contact to money in the bank.

Investors are used to seeing both convertible loans and early equity rounds. What matters most is that your structure makes sense for your stage and that you, as founders, understand what you are signing.

Founders often see lawyers as a necessary evil: expensive, slow, and focused on risk instead of opportunity. Alexander is the first to acknowledge that perception – and the reality of tight startup budgets. But his experience suggests that contacting a lawyer early is usually cheaper than trying to fix problems later.

The key takeaway for founders is not that you should over-lawyer every decision, but that it’s smart to:

• have a trusted legal contact you can call when a new “bump” appears on your road, and
• involve them before signing anything that could have long-term consequences for your cap table, IP or governance.

No founder ever said their favorite part of building a company was reading shareholder agreements. But if you want your startup to be investable and resilient, the legal basics matter just as much as your technology and go-to-market strategy.

Thinking of your legal work as a staged journey – from incorporation and founder vesting to IP, funding instruments and beyond – helps you prioritize what to tackle when. And treating lawyers as partners on that journey, rather than last-minute firefighters, can save you time, equity and stress.

If you’re building a startup in the Basel Area and want to deepen your understanding of topics like co-founder relationships, legal basics or funding options, it helps to learn from experts and connect with peers who are facing the same questions.

Basel Area Business & Innovation regularly hosts events for founders, innovators and startup teams in the Basel Area – check out our upcoming events!

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