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Disclaimer: This content is not legal advice. It is general commentary designed to help founders get their heads around key legal concepts, decisions and risks - but it doesn’t account for your specific circumstances.

Every startup is different, and the right approach will depend on your unique situation. If you’re making important legal decisions or signing anything binding that you are unsure about, talk to a lawyer.

Managing Legal Before the First Dollar In

You're an early-stage founder or co-founder, short on time and strapped for cash. You're a visionary problem-solver, hustling hard to turn an idea into something world-changing - or at least investable. Right now, you might be deep in R&D, sketching designs, building your MVP, or lining up your first customer.

We call this the path to your Minimum Investable Proposition (MIP): that point when either a customer pays you for your product (or at least they say they will through your product market fit investigations!), or an investor sees enough promise to fund your next leap forward.

Soon enough, though, your clear vision becomes blurred by an avalanche of unfamiliar concepts: cap tables, founder equity, vesting, SAFEs, CLAs/convertible notes, ESOPs, non-participating preference shares, fully diluted funding, non-dilutive funding... it's overwhelming. And you might start asking: "Do I need a lawyer?"

The honest truth is twofold:

Lawyers aren't free. Every dollar you spend on legal help is a dollar not going into your product or growth.
Before you hit MIP, your startup has limited market value. Legal spend on protecting something perceived as "worthless" can feel counterintuitive.

That’s where this resource comes in. It’s designed to help you get your head around the legal essentials, so you can better identify risks, self-serve where possible, or at least be more up to speed if you do engage a lawyer.

We assume you’re learning this stuff for the first time. We’ve used plain language where we can, and real terms where we must. Good founders take the time to understand these concepts, because they’re important. They shape your equity, control, and capital raising ability.

Templates alone won’t cut it. Let’s unpack concepts, make smart decisions, and turn them into actionable steps you can actually use.

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Bonus! Downloadable NZ Startup Legal Templates

➡️ Bonus! Tony’s What Founders Want Startup Legal Glossary

Basic Terminology
Capital Raising Terminology

Quick Navigation

Part 1: Company Formation

Setting up a Company
Basic Terminology
Do I Need a Constitution?
Put Your IP Into the Company
Early Relationship Between a Founder and Company
Bonus: Simple Constitution Template

Part 2: Founder Equity

What is Founder Equity?
Why Founder Equity Matters
How Should Co-founders Split Equity?
Putting Shares in the Hands of Founders
What is Founder Vesting?
What does Vesting Look Like?
Bonus: IP Assignment Deed Template

Part 3: The First Capital Raise

The Hustle v The Legals
Basic Capital Raise Terminology
Structuring the Round: Priced v Unpriced
Options for Unpriced Capital Raises (SAFE v Convertible Note)
What is a SAFE?
Understanding the Post-Money SAFE
How Do I Negotiate My Post-Money SAFE?
Who Can I Raise Money From?

Tony Davis

Director, Avid.Legal

I’m Tony, a Director at Avid.legal. We work with some of Aotearoa’s most exciting high-growth tech companies and the investors who back them.

At Avid, we’re driven by a simple belief: NZ entrepreneurs are world-class problem solvers. We see it every day. Kiwis build globally competitive products, solve hard problems in novel ways, and attract top talent - all while running lean. It’s happening in our own backyard now, and it’s the foundation of our economic future. It pays staff well. It scales. And it’s weightless. We can’t build a sustainable economy by putting more commodity goods on boats and hoping for the best.

The government talks about building Roads of National Significance. But What Founders Want is focused on a different kind of road - one of far greater long-term significance. It’s a figurative road we’re laying for the early-stage founders of today and tomorrow. It won’t guarantee product-market fit, but it’s designed to help you move faster, steer around avoidable hazards, and get further on the gas (cash) in your tank.

I’m here to help founders navigate that road, and legal shouldn’t unnecessarily slow you down. I’m stoked to be putting a spade in the ground with the WFW team to help founders build real businesses, tackle meaningful problems, and shape a more ambitious future for Aotearoa.

Connect: LinkedIn | Avid.Legal

Tony’s What Founders Want Startup Legal Glossary

For comprehensive guide to terms commonly used in the NZ high-growth and investment space, check out this excellent glossary from Angel Association of New Zealand:

https://www.angelassociation.co.nz/resources/glossary/

Basic Terminology

Board	The board of directors (or just "the board") is the group of people appointed to govern the company
Business	Your business is the thing your company actually does — the product or service you’re building, selling, or scaling.
Cap Table	A table describing the capitalisation of a company. The cap table should describe the number, type and percentage of shares (and convertible securities) owned by each shareholder / investor.
Constitution	The constitution is like the rulebook for your company. It adds to or replaces the default rules in the Companies Act.
Director	A person validity appointed to govern and oversee a company on behalf of its shareholders
Shareholders	Those individuals or entities who own the shares
Shares	Shares represent ownership in the company. Think of ownership like a pie, and the shares are the slices. Shares can come in different types, but we will get into that later.

Capital Raising Terminology

Pre-Money Valuation	The value of your company before new investment goes in.
Post-Money Valuation	The value of your company after the investment lands. It’s your pre-money valuation plus the new capital raised.
Round Size	The total amount of capital you’re raising in a given funding round — whether it’s from one investor or several. You’re usually targeting enough to get to your next big milestone (whether that’s product launch, revenue, or market validation) so that your next raise can happen at a higher valuation..
Minimum and Max Round Size	Sometimes your raise is framed as a range (e.g. $500k–$1.5M): • Minimum: The least you’re willing to raise for the round to proceed — below this, the round doesn’t happen. Investors will also want to know that this amount is enough for you to make a difference. • Maximum: The cap on how much you’ll accept, even if there’s more demand. Too much capital early tends to create too much dilution. This helps create structure and urgency for investors, and ensures you're not raising too little or taking more money than you can put to good use.
Price per Share	The value of one share in your company. It’s calculated by dividing the pre-money valuation by the total number of shares on issue (including any shares that would be issued if options or convertible securities were exercised).
Dilution	The reduction in your ownership percentage as you bring in investors.
Exit Event / Liquidity event	The moment founders and investors turn shares into cash. Usually through a company sale.
Term Sheet	A short form document summarising the key terms of your capital raising round.
Pre-Seed Round	Often called the "friends and family" round, but can include angel investors or early backers too. You’re raising a small amount to validate the big idea: customer discovery, market research, and MVP development
Seed Round	You’ve proven there’s a spark, now it’s time to build a fire. Seed capital is usually used to build your team, launch your product and prove you can acquire and retain real customers
Series A	You’ve found product-market fit, now it’s about scaling. Series A is for companies with real traction who need capital to expand the team, scale customer acquisition, enter new markets and lockdown repeatable revenue

Part 1: Company Formation

Part 2: Founder Equity

Part 3: The First Capital Raise

Avid.Legal

https://www.avid.legal/

Curiosity ignites innovation, courage drives success. We’re the go-to legal experts for innovators who value both.

Avid.legal is a tight-knit team of forward-thinking New Zealand lawyers inspired by innovation. We enjoy partnering with high-growth companies, especially those venturing through the dynamic landscape of the technology sector