Raising money for a startup in 2025 is as much about law as it is about vision. While founders focus on storytelling, product-market fit, and pitch decks, tech startups often overlook the complex framework of startup fundraising law that governs everything from how equity is issued to what happens when the company exits. Getting these legal details wrong doesn’t just cause delays—it can unravel entire deals.
The most common fundraising instruments today are still SAFEs (Simple Agreements for Future Equity), convertible notes, and preferred stock rounds. Each comes with different legal implications. SAFEs, originally designed by Y Combinator, are fast and founder-friendly but require clarity around valuation caps, discounts, and conversion mechanics. Convertible notes are similar, but function as debt and introduce maturity dates and interest obligations. Preferred stock is more complex, typically used in priced rounds with institutional investors, and involves voting rights, liquidation preferences, anti-dilution provisions, and board seats.
Startup Fundraising Law Update
Startup fundraising law is governed by federal and state securities regulations. Issuing equity—whether through SAFEs or stock—triggers securities law compliance obligations under the Securities Act of 1933. Founders must either register the offering (which almost no startup does) or qualify for an exemption, typically under Regulation D, Rule 506(b) or 506(c). Failing to comply can expose founders to personal liability, regulatory penalties, or investor lawsuits.
Beyond regulatory compliance, fundraising involves legally binding documents that shape the future of your startup. These include term sheets, subscription agreements, investor rights agreements, stock purchase agreements, and amended corporate bylaws. Each clause in these documents—board composition, information rights, voting thresholds—can tip the power balance between founders and investors. At L.A. Tech and Media Law Firm, we work with clients to negotiate and draft these terms strategically, protecting long-term founder control while still attracting capital. You can learn more about our venture capital legal services here.
Another critical issue in startup fundraising law is managing the cap table—the record of who owns what. Every SAFE or note converts into equity eventually, and failure to model those conversions correctly leads to messy, uncertain ownership stakes. Investors want to see a clean, realistic cap table before signing. Mistakes here signal legal disorganization and turn off serious money.
Startup Fundraising From Friends and Family
Founders also ask: can I raise money from friends and family? The answer is yes—but carefully. All securities laws still apply, and relying on “they know me” isn’t a legal defense. Even friendly money should be documented through appropriate investment contracts, with clear disclosures and risk statements. This not only protects the company—it protects the relationships.
We also advise clients on avoiding general solicitation violations, which can occur if you publicly advertise your offering without meeting the right legal conditions. That includes what you say on social media, pitch events, or even what appears on your website.
Finally, raising capital isn’t a one-time event—it’s a recurring process. What you do in your first round affects your leverage, valuation, and legal position in your next. Every funding decision should be made with your next round, your exit, or your M&A strategy in mind.
Startup fundraising law isn’t just paperwork—it’s foundational strategy. It determines how much of your company you keep, how decisions are made, and how investor relationships are managed. And in 2025’s more cautious funding climate, legal sophistication is one of the signals that helps startups stand out from the noise.
Startup Fundraising Attorney
David Nima Sharifi, Esq., founder of L.A. Tech and Media Law Firm, advises technology startups on SAFE agreements, venture financings, cap table strategy, and investor negotiations. Featured in the Wall Street Journal and recognized among the Top 30 New Media and E-Commerce Attorneys by the Los Angeles Business Journal, David helps founders raise capital while protecting their legal and financial future.
Schedule your confidential consultation now by visiting L.A. Tech and Media Law Firm or using our secure contact form.
