Series A Funding In New Zealand: What Startups Should Know Before Raising

Raising Series A funding is one of the biggest milestones in a startup’s life. It’s often the point where you go from “we’ve proven something works” to “we’re ready to scale it properly”.

But while Series A can be exciting, it also comes with a big reality check: investors will look closely at your legal foundations, your ownership structure, and whether your business is actually investable.

If you’re planning a Series A raise in New Zealand, don’t stress - you don’t need to have everything perfect on day one. But you do want to know what’s coming, what investors typically expect, and what you should tidy up before you start sending out decks and taking meetings.

Below, we’ll walk you through how Series A funding usually works, what legal documents are commonly involved, and the key issues that can slow down (or derail) a raise if they’re ignored.

What Is Series A Funding (And Why Is It Different)?

Series A funding is typically the first “institutional” equity round a startup raises. In plain terms, that usually means:

• you’re raising a meaningful amount of capital to scale (not just to build an MVP);
• you’re selling shares in the company (equity) in exchange for investment; and
• the investors are usually more formal and more process-driven than early supporters.

Series A tends to come after a pre-seed or seed round, but there’s no universal rule - the label “Series A” is often more about the stage and expectations than any fixed dollar amount.

What Investors Usually Want To See At Series A

Although every investor is different, Series A investors commonly expect you to have:

• traction (revenue, active users, strong growth, or clear commercial validation);
• a repeatable business model (not just a great idea);
• a scalable plan for how the funds will be used;
• a credible cap table (ownership structure that makes sense); and
• clean legal foundations (so their investment isn’t exposed to avoidable risks).

This is where many founders get caught out. You might have a great product and strong momentum - but if your company records are messy, IP ownership is unclear, or your shareholder arrangements don’t match how you actually operate, investors may pause (or renegotiate hard).

Are You Ready For A Series A Raise?

Before you jump into fundraising mode, it helps to sanity-check whether you’re at a Series A stage - and whether your business is legally and commercially ready to raise.

A Simple “Series A Readiness” Checklist

Here are some practical questions to run through:

• Can you clearly explain your metrics? For example, revenue growth, churn, CAC, LTV, pipeline, and margins (where relevant).
• Do you know exactly what you’re raising for? Hiring, product development, entering new markets, working capital, etc.
• Is your cap table up to date? Including any promises you’ve made (even informal ones) to advisors, early supporters, or team members.
• Do you have your key documents in writing? Especially founder arrangements, equity arrangements, and key commercial contracts.
• Is your IP actually owned by the company? Not sitting with a founder, a contractor, or an old development studio.

One of the most common issues we see is founders leaving legal cleanup until an investor is already interested. At that point, you’re under time pressure, you may lose leverage, and you risk deals stalling during due diligence.

If you’re still early and deciding whether your business should be structured for investment, it’s worth sorting out your Company Set Up properly before you raise (it’s much easier to fix things early than mid-raise).

What Legal Documents Do You Need For Series A Funding?

A Series A round isn’t just a bank transfer and a handshake. It’s a legal transaction where new shareholders invest in return for shares, with defined rights and protections.

The exact documents will depend on your deal, your investor, and your existing structure - but below are the common ones you’ll want on your radar.

Term Sheet (Commercial Deal Summary)

The term sheet usually sets out the key commercial terms, such as:

• how much is being invested and by whom;
• the valuation (pre-money / post-money);
• what shares are being issued (and any special rights attached);
• board composition and governance rights;
• investor protections (like consent matters); and
• any conditions that must be met before completion.

Even where a term sheet is described as “non-binding”, it’s common for some clauses to be binding (for example, confidentiality and exclusivity). And in practice, the term sheet usually drives the structure of the final documents - so getting the Term Sheet right early is crucial.

Share Subscription Agreement (The Investment Contract)

This is typically the contract that documents the actual investment and share issue. It often covers:

• the amount being invested and the number/class of shares issued;
• completion mechanics (when money is paid and shares are issued);
• conditions precedent (what must happen first);
• warranties (promises about the state of the business); and
• liability rules (what happens if warranties are incorrect).

Warranties are a big deal in Series A. Founders sometimes treat them as “standard wording”, but they can create real personal and company risk if you don’t understand what you’re signing up to.

Shareholders Agreement (Rules Between Owners)

A Series A investor will usually expect a formal set of rules covering how shareholders interact and how key decisions are made. This is often done through a Shareholders Agreement.

It commonly covers things like:

• reserved matters (decisions requiring investor consent);
• board appointment rights;
• share transfer restrictions;
• pre-emptive rights (who gets offered shares first in future rounds);
• deadlock processes;
• exit mechanics (including drag-along and tag-along rights); and
• founder obligations (sometimes including vesting or restrictions).

If you already have a shareholders agreement from a seed round, Series A often triggers an update or full replacement so the governance matches the size and risk profile of the investment.

Company Constitution (How The Company Operates Internally)

In New Zealand, companies are governed by the Companies Act 1993 and their constitution (if they have one). Investors may want the constitution updated to reflect share classes, voting rights, and procedural rules.

If you’re raising Series A, it’s common to adopt or amend a Company Constitution so the company’s internal rules align with the investment terms and the Companies Act requirements.

Founder And Employee Equity (Vesting And Incentives)

Many Series A rounds involve tightening up who owns what, and under what conditions. If you have (or plan to introduce) equity incentives, you’ll often need documents around vesting and leavers.

For example, you might use a Share Vesting Agreement so that equity is earned over time (rather than fully “given away” upfront). This can be especially important if investors are worried about a founder leaving shortly after raising.

Investors also commonly ask whether you have key staff locked in on appropriate agreements, including an Employment Contract with confidentiality, IP, and restraint (where appropriate) clauses.

Key Legal Issues Investors Will Check In Due Diligence

Due diligence is where investors (and their lawyers) look under the hood. This is the part founders often underestimate - and it’s where legal issues can slow down a Series A or change the deal terms.

Here are some of the most common legal areas investors focus on in a Series A round.

1. Company Structure And Cap Table Accuracy

Investors will want to confirm:

• the company is correctly incorporated and in good standing;
• share registers are accurate and up to date;
• past share issues were properly approved and recorded; and
• there are no “side deals” or undocumented equity promises.

If there’s confusion about who owns what, it creates risk - and investors don’t like uncertainty.

2. Intellectual Property (IP) Ownership

This is a major one for startups. Investors usually expect the company (not individuals) to own key IP, such as:

• software code;
• product designs;
• branding assets;
• databases and content; and
• domain names and key accounts.

If a founder built the product before the company existed, or you used contractors without proper IP assignment clauses, the IP may not automatically belong to the company. That can be a deal-breaker unless it’s fixed.

3. Material Contracts And Commercial Risk

Series A investors often look for:

• customer contracts (especially large customers);
• supplier contracts and pricing commitments;
• distribution or channel agreements;
• leases and property arrangements; and
• any revenue share, referral, or exclusivity deals.

If your revenue depends on a handshake agreement or an email chain, you’re exposed. Well-drafted written contracts can be the difference between “investable” and “too risky”.

4. Compliance With Key New Zealand Laws

Even at startup stage, you’re expected to comply with laws that apply to your operations. Investors will often check whether you’re managing compliance risks sensibly, including:

• Privacy Act 2020: if you collect customer data, you’ll need to handle it responsibly and securely, and you may need a clear Privacy Policy (especially if you operate online).
• Fair Trading Act 1986: your marketing claims and representations to customers need to be accurate and not misleading.
• Employment Relations Act 2000: if you’ve hired staff, your contracts, processes, and pay practices should be compliant.
• Health and Safety at Work Act 2015: relevant if you have a physical workplace, machinery, or operational risks.

If your raise involves offering shares to investors in New Zealand, you also need to be mindful of the Financial Markets Conduct Act 2013 (FMCA). Exactly what’s required depends on the type of offer, who the investors are (for example, whether they qualify under an exclusion such as “wholesale investor”), and how you’re marketing the raise. Some raises can rely on exclusions or other compliant pathways, while others may trigger more formal disclosure obligations - so it’s important to get tailored advice before you approach multiple investors.

5. Founder And Director Obligations

As you scale, governance becomes more formal. Directors have duties under the Companies Act 1993, and investors will usually want comfort that the company is being run properly.

That includes things like:

• documenting key decisions (not just making them informally);
• managing conflicts of interest;
• keeping proper financial and company records; and
• understanding when directors can become personally exposed (for example, if trading while insolvent, or giving personal guarantees).

This is also why Series A often comes with a board restructure - not because investors want to take over, but because clearer governance reduces risk for everyone.

What Does The Series A Funding Process Look Like In Practice?

Every raise is different, but most Series A rounds follow a similar pathway. Knowing the flow helps you plan your timing (and avoid getting stuck in legal limbo while trying to run your business).

1. Pre-Raise Cleanup

This is the stage where you get your “house in order”, such as:

• confirming your cap table and share records are correct;
• sorting IP ownership and contractor agreements;
• checking material contracts are signed and enforceable; and
• reviewing your existing shareholder arrangements for gaps.

Doing this early is one of the best ways to keep control of your timeline (and reduce last-minute investor demands).

2. Negotiating Key Commercial Terms

This typically happens in parallel with investor meetings. Once you have interest, you’ll usually move to a term sheet stage.

At this point, it’s worth slowing down enough to understand what you’re agreeing to - especially on:

• valuation and dilution;
• control provisions and reserved matters;
• founder vesting or restrictions;
• liquidation preferences (how proceeds are shared on an exit); and
• warranties and founder liability.

3. Due Diligence

Investors will request documents and information. This often includes:

• company registers and governance records;
• financial statements and forecasts;
• key contracts;
• IP evidence and assignments;
• employment/contractor records; and
• privacy and compliance policies.

If you’ve prepared well, due diligence is usually a “confirm and proceed” process. If you haven’t, it can turn into a scramble to fix foundational issues under deadline.

4. Documenting And Completing The Round

Once documents are negotiated and signed, completion happens. That generally means:

• funds are transferred;
• shares are issued and recorded;
• the constitution and shareholders agreement are implemented or updated; and
• post-completion steps are completed (like Companies Office filings where needed).

After completion, it’s important to keep your governance and record-keeping disciplined - future raises (Series B and beyond) build on what you do now.

Key Takeaways

• Series A funding is a major growth step, and investors will expect your business to be legally and operationally ready to scale.
• A Series A round usually involves formal documents like a term sheet, share subscription agreement, updated constitution, and a shareholders agreement.
• Investors will check fundamentals during due diligence, including your cap table accuracy, IP ownership, key commercial contracts, and legal compliance.
• Common New Zealand laws that can come up include the Companies Act 1993, Financial Markets Conduct Act 2013, Privacy Act 2020, and Fair Trading Act 1986.
• Founder and employee arrangements matter - especially where equity, vesting, and retention are key to the company’s value.
• Doing legal “cleanup” before fundraising can reduce delays, improve investor confidence, and help you keep leverage in negotiations.

This article is general information only and isn’t legal advice. It also doesn’t cover accounting or tax treatment of equity issues - you should speak to an accountant or tax adviser for advice on those aspects of a capital raise.

If you’d like help getting your business ready for a Series A raise - or you’re negotiating a term sheet and want to make sure you’re protected from day one - you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.