Incorporate before pitching to VC’s?
While you will definitely need to be a corporate entity before you can accept funding from any investor (or issue stock options to any employees), the specific corporate status of the venture at this stage is much less important to investors than its functional status. That is, if all you have is a good idea, the reality is that you are highly unlikely to be able to get funding from anyone at all, even if you are a Delaware C corporation with gilt edge stock certificates. But if you have a completed product with traction (such as a million monthly unique visitors with rapidly growing conversion rates to paying customers) you will find investors falling all over themselves to meet you, even if you are operating as a one-man show out of a shack on the beach.
I would, therefore, suggest that you not using “pitching to VCs” as a reason—one way or the other—to consider incorporating. If and when you garner real investment interest, proper corporate structuring will be a pre-condition to any funding.
However, there are many other good reasons for establishing the company as a legal entity… and for doing it correctly. They include structuring the relationship between co-founders, and founders and employees, limiting liability, being able to open a bank account, issuing equity to employees and advisors, etc. I suggest you find a good attorney specializing in this sort of thing, and take advantage of their almost-universal willingness to give you a free first meeting to determine whether you are at the stage where you should be forming a corporate entity.
Or consider using Gust Launch, which has been used by hundreds of entrepreneurs to start and run their companies!
Written by David S. Rose
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