Working out how to find investors can feel like a mix of excitement and uncertainty.
On one hand, investment can help you hire faster, build product sooner, and scale your startup with more confidence. On the other hand, the moment you start talking to investors, you're stepping into a world of term sheets, valuation discussions, confidentiality concerns, and "quick" legal questions that can have long-term consequences.
The good news is you don't need to have every legal document perfected before you start investor conversations. But you do need to be organised, consistent, and protected from day one - because investors will ask questions, and the way you answer them signals whether you're investable.
Below is a practical, NZ-focused legal checklist to help you approach fundraising with confidence (and avoid common pitfalls that can slow down or derail a deal).
This article is general information only and does not constitute legal advice. If you need advice about your specific situation, get tailored advice.
How Do Investors In New Zealand Typically Invest In Startups?
Before we get into how to find investors, it helps to understand what investors usually want and how they typically invest.
In New Zealand, early-stage fundraising commonly happens through:
- Equity investment (investors buy shares in your company)
- Convertible instruments (money goes in now, converts into shares later - usually at a discount or with a valuation cap)
- Milestone-based investment (funding released in stages if targets are met - sometimes used, depending on the investor and industry)
From a legal perspective, each option involves different documents, different negotiation pressure points, and different compliance steps.
For example, an equity round often means updating your cap table, issuing shares properly, and putting in place rules for decision-making and exits. A convertible round still needs clear paperwork and careful thinking about what happens at conversion (and what rights the investor has in the meantime).
Also, many investors prefer startups to operate through a company (rather than as a sole trader), because it's generally simpler to issue shares and set clear governance. If you're still deciding on structure or you need to clean up how your startup is set up, that's worth doing early through a proper Company Set Up.
How To Find Investors: What You Should Prepare Before You Start Pitching
There's plenty of commercial advice out there about networking, pitch decks, accelerators, and warm introductions. But if your legal foundations are shaky, even a great pitch can turn into a long due diligence slog.
Here's what you'll want to have clear before you start investor conversations.
1. Your Business Structure And Ownership Are Clear
Investors want certainty about what they're investing in and who owns what.
At a minimum, you should be able to answer:
- Is the business operating through a registered company?
- Who are the shareholders and what percentages do they own?
- Are there any side agreements with founders, early contributors, or advisors?
- Are there any disputes (even "informal" ones) about ownership?
If there are multiple founders, you'll want clear rules around what happens if someone leaves, stops contributing, or wants to sell their shares. This is where a Shareholders Agreement becomes a key part of being investor-ready.
You should also consider whether your company's rules are fit for investment (for example, share transfer restrictions, director powers, and decision thresholds). A tailored Company Constitution can help align governance with what investors expect.
2. Your Cap Table And Share Issuance History Stacks Up
One of the fastest ways to make an investor nervous is a messy cap table.
Common issues we see include:
- Shares promised but never properly issued
- Handshake deals with early supporters (without documents)
- Discounted "founder shares" without clarity on vesting or performance expectations
- Confusion about whether someone is an employee, contractor, advisor, or co-founder
If you're planning to offer equity to founders or early team members over time, it's often better to document that properly rather than "sorting it out later". A structured Share Vesting Agreement can reduce the risk of someone walking away with a large chunk of equity after a short period.
Investors also care about whether you have authority to issue shares and whether any shareholder consents are needed. Getting this right early saves you from having to fix errors during due diligence - which can delay funding when timing matters most.
3. You Can Explain What The Investor Is Actually Buying
From a legal standpoint, an investor isn't buying a vibe - they're buying rights.
Even at an early stage, you should be clear on:
- What class of shares will be issued (ordinary shares vs preference shares, if applicable)
- Whether shares come with voting rights
- Whether investors will get information rights (like financial reporting)
- Whether there are any veto rights on key decisions
This usually becomes formalised in a term sheet first, and then in the investment documents. The key is to avoid agreeing to something in a pitch meeting that you later find out is commercially or legally risky.
If you're raising money through a convertible instrument rather than equity straight away, you'll still want clear documentation. In practice, some startups use an instrument like a SAFE (or a convertible note), but what matters is that you document the deal properly and understand the conversion triggers and investor protections. A SAFE Note can be a useful structure in the right circumstances, but it still needs to match how your business and cap table actually work.
What Legal Documents Should You Have Ready For Investor Due Diligence?
Due diligence is basically an investor asking: "Is this business real, compliant, and investable?"
Early-stage due diligence can be lightweight, but you should assume that any serious investor will want to review documents around ownership, IP, contracts, and risk.
Here's a checklist of core legal documents and information to have ready (or ready to prepare quickly).
1. Founder And Team Documents
If you have employees, investors will want to know the team is properly engaged and there's no hidden liability.
That typically includes:
- Signed employment agreements (or contractor agreements where appropriate)
- Clear job titles and responsibilities
- Confidentiality and IP clauses in the right places
If you're hiring or have already hired, an Employment Contract is one of those documents that quietly protects your business in the background - and shows investors you're running your startup like a real operation.
If you've engaged contractors (especially developers or creatives), make sure you're crystal clear on IP ownership. It's a common (and costly) misconception that "if you paid for it, you own it". That's not always how it works unless your contract says so.
2. IP Ownership Proof (Or A Plan To Fix It)
For many startups, the most valuable asset is the IP: your software, brand, designs, product formula, or proprietary process.
Investors will want comfort that:
- Your company (not an individual founder) owns the key IP
- Contractors have assigned IP correctly
- Your branding doesn't infringe someone else's rights
- You've taken sensible steps to protect your IP
If your IP is still sitting personally with a founder, or you've used freelancers without IP clauses, it doesn't mean investment is impossible - but it does mean you should fix it before the investor spends money on due diligence.
3. Customer And Supplier Contracts (Even If You're Early)
Investors want to see how you make money and what obligations you've taken on.
If you're already trading, be ready to share:
- Your customer terms and conditions (especially if you sell online)
- Any key supplier agreements
- Any major commercial partnerships
- Any leases or commitments that create ongoing costs
If you don't have these documented and you're doing deals informally, it's worth tightening up. It's much easier to negotiate investment when you can confidently say: "Yes, our key contracts are signed and enforceable."
4. Your Data And Privacy Settings (Especially For Online Startups)
If your startup collects personal information (customer details, emails, payment information, health data, location data, analytics, etc), you need to take privacy seriously.
In NZ, the Privacy Act 2020 sets expectations around collecting, using, storing, and disclosing personal information. Even if you're small, privacy compliance matters - and investors increasingly ask about this because privacy failures become reputational and financial risk.
A solid Privacy Policy is a good starting point, but you also need your internal practices to match what the policy says (for example, where data is stored, who has access, and how you respond to a data breach).
What Laws Should Your Startup Be Complying With Before You Seek Investment?
When you're focused on growth, compliance can feel like a distraction - but it's one of the quickest ways an investor decides whether your business is "safe" to back.
Some key NZ legal areas to think about before you pitch include:
Fair Trading And Consumer Law
If you're selling to consumers, you'll need to understand how the Fair Trading Act 1986 and the Consumer Guarantees Act 1993 affect your advertising, pricing claims, refunds, and product/service guarantees.
Investors don't want to fund a business with misleading marketing risk baked in. Make sure your website, pitch deck, and customer messaging are consistent and not overpromising.
Employment Law (If You're Building A Team)
If you've got employees (or plan to), investors will expect you to be across minimum entitlements, good faith obligations, and practical HR risk management.
Misclassifying workers (for example, treating someone as a contractor when they're really an employee) can create real liability - and it's the kind of issue that can pop up during due diligence.
Health And Safety (Even For Office-Based Startups)
If you have a workplace, you'll likely have obligations under the Health and Safety at Work Act 2015.
This isn't just for construction or factories. Startups with offices, warehouses, events, or physical products should consider health and safety risks, policies, and incident processes. If you're doing anything higher risk, get tailored advice early.
How To Avoid Legal Mistakes When Negotiating With Investors
Finding investors is only half the job. The other half is making sure you don't agree to something that causes you trouble later.
Here are common legal mistakes we see founders make during fundraising - and what to do instead.
When you're trying to explain your product and traction, it's normal to share sensitive information. But you should think carefully about what you disclose, and when.
As a practical approach:
- Start with high-level info first
- Only share sensitive details once there's genuine interest
- Keep a record of what you shared and with whom
In some cases, using an NDA is appropriate - but it needs to be realistic and fit-for-purpose (and some investors may refuse). The key is having a plan and not giving away the "secret sauce" too early.
2. Agreeing To Terms You Don't Fully Understand
It's easy to focus on valuation and ignore the clauses that quietly shift power away from founders.
Be especially careful with terms around:
- Control and veto rights (who can block key decisions)
- Board seats and director appointments
- Founder vesting (or "reverse vesting")
- Liquidation preferences (who gets paid first on an exit)
- Anti-dilution protections
- Drag-along/tag-along rights
You don't need to become a lawyer - but you should get a lawyer involved early enough that you're not stuck with a "take it or leave it" document at the last minute.
3. Not Thinking Ahead To The Next Round (Or An Exit)
Smart investors think about what happens after they invest: future rounds, acquisition, and exit pathways.
So should you.
Even if you're raising a small seed round now, you want the deal structure to support your next raise, rather than making it harder. For example, messy shareholder arrangements or unclear IP ownership can scare off later investors, even if your product is strong.
If you're doing a more formal share issue, you'll usually need proper investment documentation. Where relevant, a Share Subscription Agreement can help document the terms of the share issue and provide clarity about what each side is committing to.
Key Takeaways
- Finding startup investors is much easier when your legal foundations are solid, because investors look for clarity, reduced risk, and clean documentation.
- Before you pitch, make sure your ownership structure and cap table are accurate and defensible, with no "handshake equity" left undocumented.
- Have key governance documents in place, like a Shareholders Agreement and (where appropriate) a Company Constitution, so decision-making and exits are clear.
- Be ready for due diligence with your employment/contractor arrangements, key commercial contracts, and clear IP ownership evidence.
- If you collect personal information, comply with the Privacy Act 2020 and ensure you have a fit-for-purpose Privacy Policy and matching internal practices.
- Don't rush fundraising documents - investment terms can affect control, dilution, and exit outcomes, so it's worth getting tailored legal advice before signing anything.
If you would like help getting your startup investor-ready - from structuring your company to reviewing investment documents - you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
