Securing investment is never a one-time event, especially for life sciences and other technology companies.
The path to commercialization is long, often unpredictable and rarely linear. That’s why it’s not just the funding that matters but also the structure behind it. At Crowley Law LLC, we’ve worked with founders from the earliest pre-seed rounds through complex growth-stage deals. We’ve seen how the right investment contract, supported by the right group of supporting agreements, can preserve management flexibility while still fostering investor relations that last.
Every investment is the beginning of a new relationship and like any relationship, it works better when the expectations are clear.
An investment agreement is the document that puts those expectations in writing. They come in several types. It outlines the initial investment, the ownership interest being offered and the protections that come with that stake. It also defines what each side can expect in terms of decision-making, returns and long-term involvement.
Depending on the type of financing involved, the agreement may be called a Stock Purchase Agreement if the capital stock of a corporation is being acquired, a Convertible Debt Agreement if debt instruments convertible into equity are being acquired or a simple agreement for future equity, a “SAFE”, if the investor seeks rights to acquire equity in the future subject to certain conditions. Each agreement brings the full picture into focus. It helps establish a shared understanding of the investment amount, investment terms and the rights triggered by that investment.
Many founders are laser-focused on closing the deal, but it’s what’s written into the agreement that truly shapes the investment relationship. Here are some of the key components we include to help structure a strong, balanced investment agreement:
Set the baseline for your deal. This is where you agree on how much is coming in and what your company is worth at this stage.
You need to discuss equity stakes and ownership rights: how much of the business you are giving up and with what kind of power or limitations.
Investors may want a seat at the table. Clarify how much influence they will have and whether they will help select board members or participate in major decisions.
Protects early investors by making sure they don’t lose disproportionate value in future equity rounds, especially if the valuation drops.
Whether issued to founders or employees — a Restricted Stock Agreement, along with a clearly defined vesting schedule, helps preserve long-term commitment and avoid premature ownership transfers.
Be transparent about where the money is going and how everyone gets out. A shared understanding here can help avoid headaches later.
These clauses protect your company’s interests from misuse or unfair competition by the other party, especially when your Intellectual Property (“IP”) is your edge. Non-competition clauses must be crafted carefully to comply with applicable law and, even if permitted, need to be grounded on important business interests.
If things go sideways, having a clear plan for resolving conflicts — whether through arbitration or court — can save time, cost and focus.
There’s a right way to structure an investment agreement and then there’s the version that leaves founders exposed. Here are five common errors we help clients avoid when structuring a long-term investment agreement:
Failing to document a clear and defensible valuation invites conflict in future rounds. A well-supported valuation from the start protects the company’s funding trajectory and helps avoid dilution.
Without coordination, new investors can end up with rights that disrupt internal governance or conflict with other stockholders.
Vague or missing confidentiality language can lead to leaks of proprietary data or misappropriation by an unauthorized third party — a major risk in IP-driven businesses.
Poorly worded agreements can limit a company’s ability to negotiate with future acquirers or strategic partners, costing founders leverage in future sales or new investments.
Founders who hesitate to negotiate terms often lock in obligations that don’t reflect the business’s potential or risk profile.
At Crowley Law LLC, we bring deep transactional experience to help founders structure investment contracts that are built for growth without sacrificing control. We approach every agreement as a safeguard against future disputes, unwanted dilution or regulatory exposure.
We help clients move beyond generic investment agreement templates by drafting agreements that reflect their capital structure, equity strategy and business priorities.
Our team advises on Convertible Debt Agreements, integrating them into broader fundraising strategies and documenting them in alignment with securities laws and investor expectations.
We draft and review statutory Equity Incentive Plans, Stock Option Agreements and related documents to help startups manage incentive equity while maintaining control over the company’s stock.
We maintain strong relationships with experienced tax advisors who can help assess the implications of each deal. We regularly collaborate on matters involving the Internal Revenue Code, including Qualified Small Business Stock under Section 1202 and realization elections under Section 83(b).
We write and review every agreement with full awareness of the relevant laws that govern your transaction and sector.
A thoughtfully drafted agreement gives everyone involved a clear view of what they’re committing to and what happens if things change. At Crowley Law LLC, we’ve seen how a strong legal foundation builds confidence on all sides of the deal. If you’re preparing for a funding round or revisiting older agreements, we’re ready to help you put the right structure in place. Contact us at 908-738-9398
Founders who give up core management and governance rights too early often find themselves in a tough spot when raising future rounds. Future investors will expect the same or even greater oversight and approval rights for company actions.
Your ability to raise your next round will likely depend on hitting specific scientific, operational or regulatory milestones. While it’s not generally advisable to provide specific milestones in an Investment Agreement, investors will expect to see detailed business plans and budgets for how the funds are initially intended to be used. But, conditions change and to survive and thrive, management needs the freedom to act to protect assets or seize opportunities.
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