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 the key legal basics they recommend every founder should understand when building a startup, onboarding co-founders, hiring early team members or preparing for investment.

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.

But founder equity is only one part of the discussion. Co-founders should also agree who is responsible for what, how key decisions are made and what happens if the founders cannot agree. This becomes especially important in a two-founder setup, where deadlock can slow or stop progress at exactly the wrong moment.

Verbal alignment is not enough. If a discussion affects roles, equity, IP, decision-making or future funding, put it in writing. A clear shareholders’ agreement gives founders a shared reference point before difficult questions become personal.

For university-linked startups, equity discussions can become more complex. A professor, student, incoming CEO and first employee may all contribute in different ways. A useful starting point is to separate past contribution from future commitment. Investors will look closely at whether the people expected to drive the company have enough equity to stay motivated over the long term.

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.

IP protection is not only about patents. Founders should also make sure employment agreements, shareholders’ agreements and confidentiality obligations clearly support the company’s ownership or use of the know-how it depends on. That includes clarifying what happens to know-how developed by employees or co-founders during the life of the company.

The bottom line: make sure your IP, know-how and licensing rights are properly documented and aligned with your company’s growth plans before serious investor conversations start.

Startups often cannot match the salaries offered by established companies. That makes equity-based incentives an important tool when hiring first employees or early team members.

Employee incentive plans can take different forms. Some companies grant options that allow employees to acquire shares over time. Others grant shares directly, usually with vesting conditions attached. In both cases, the structure should create a real incentive to help grow the company, not a one-time benefit that becomes disconnected from future contribution.

Founders should also check the tax implications before making promises. Equity can be attractive for employees, but only if the legal and tax setup is clear enough for them to understand what they are receiving and when it may become taxable. This is an area where legal and tax advice should work together.

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. Founders should pay close attention to the valuation cap and discount, as these terms determine how much equity the investor receives when the loan converts.
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.

Before accepting angel investment, founders should also take the term sheet seriously. Some provisions may not be fully legally binding, but once a term sheet is agreed, it can become difficult to renegotiate the commercial logic later. Getting expert input before signing can help founders avoid terms that limit flexibility in the next round.

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.
• Build substance before you negotiate where possible. The more proof you can show, such as patents, data, customer traction or other credible milestones, the more leverage you usually have in funding discussions.

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 helps you prioritize what to tackle when, from incorporation and founder vesting to IP, first hires, angel investment and beyond. 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.

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