Aligning Your Legal Foundation with Investor Standards

You're pitching. The slides are clean, the traction is strong, the product's solid. But then comes the investor Q&A, and someone leans in with: "Can you walk us through your legal setup?"

Cue the awkward silence? Not if you're ready. Here's a founder-friendly, practical roadmap that breaks down the most common legal questions Swiss startups face from investors so you can pitch with clarity and confidence.

1. What legal form is your company registered under? 

Investors want to know: GmbH or AG? Investors prefer to do an equity investment in an AG (Aktiengesellschaft) rather than a GmbH (Gesellschaft mit beschränkter Haftung) due to several structural limitations. These include the lack of share publicity, the administrative burden of notarizing share transfers, and less flexibility in capital structure. While GmbHs are simpler and cheaper to establish, converting to an AG before a significant funding round is often essential to avoid friction during investment. An AG offers easier share transfers, a more standardized governance structure, and is seen as a more mature vehicle by institutional investors. 

Tip: Make sure your commercial register entry is accurate and up to date. Bonus points if you already have a digital extract handy and your articles of association reflect your current equity structure.

2. Is your cap table clean and well-structured?

Investors don't just want to see who owns what. They want to know it's all legally sound. That means signed shareholder agreements, clear founder vesting terms, and no side agreements lurking in the background. Your cap table should match your shareholder register exactly.

Tip: Keep your cap table simple. Tools like Ledgy or Carta help, but a well-maintained Excel sheet that tells a clear story is still acceptable early on which is often preferred by many investors, since they are accustomed to reviewing structured Excel files. Make sure you account for all instruments like convertible loans, options, phantom shares and SAFEs.

3. Who owns the IP? (And is it protected properly?) 

Whatever form your intellectual property takes; software, data, algorithms, patents, or product designs, it must be legally secured. Investors expect to see clear IP assignment agreements from all founders, employees, and contractors. This applies not only to current team members but also to any work created before the company was formally incorporated. If you've worked with external agencies, ensure your contracts include explicit IP transfer clauses. If you're a spin-off from institutions like ETH or EPFL, operating under a license agreement is common and can be perfectly acceptable. But investors will want clarity: Is the license exclusive? Is it global? Does it include sublicensing or transfer rights in case of acquisition? Any ambiguity in these terms can signal future risk. 

Tip: Whether you own or license your IP, make sure the legal documentation reflects your growth plans. Include copies of IP agreements in your data room, and be ready to explain them clearly in investor conversations. Don’t assume your dev agency gave you full IP rights. Always check the contract. And if your IP is licensed, be transparent, include a copy of the agreement and make sure it's aligned with your growth and fundraising plans. Get standard assignment clauses in all employment and contractor agreements from day one.

4. Are your employment contracts in shape?

Swiss labor law is founder-friendly compared to other European jurisdictions, but that doesn't mean you can wing it. Investors will want to know if your team is properly hired, paid, and protected. That includes signed employment contracts that comply with Swiss law, including statutory notice periods, vacation days, and working hours.

Tip: Use Swiss-compliant templates and make sure to include confidentiality and IP assignment clauses in every employment contract. Also, be transparent about remote workers and how you handle compliance across borders. Non-compete and non-solicitation clauses are standard and often expected by investors, especially in smaller teams. Investors frequently want to see that any bonus structures are fully discretionary. These points can become subjects of renegotiation during due diligence and may delay the process if not clearly documented and defined in contracts. 

5. Are you data-compliant (GDPR and Swiss FADP)?

If you're handling personal data, you need to be on top of your compliance game. Switzerland’s Federal Act on Data Protection (FADP) and the EU's GDPR require companies to protect user data, define processing purposes, and notify users transparently.

Tip: At minimum, you need a privacy and cookies policy, data processing agreements with third-party service providers, and internal policies for handling data subject requests. Use reputable templates to get started but get a legal review before scaling or raising funds.

6. Are your taxes and social security obligations covered?

This is often overlooked until the due diligence checklist lands in your inbox. Swiss tax authorities expect regular VAT filings (if applicable), corporate tax submissions, and social security declarations for all employees. Delays or errors here can raise investor concerns.

Tip: Use a local fiduciary or accounting platform that specializes in startups. Make sure all salary payments include proper deductions for social security, and pension (BVG). For foreign employees without a C permit, employers are required to deduct income tax at source and remit it directly to the authorities. Have at least one year of financial statements and tax filings ready for review, if possible.

7. Do you have the right commercial contracts in place?

Whether it's customer agreements, SaaS terms, or supplier contracts, your legal house should be in order. Investors will want to see that you're managing risk, ensuring revenue enforceability, and limiting liability.

Tip: Use clear, written contracts even for friendly pilot customers. Include standard clauses like jurisdiction, liability limits, and IP ownership. Let’s say you’re running a digital subscription service, maybe it’s an online language learning platform for schools. You charge a monthly fee, promise 24/7 access to content, and highlight GDPR compliance on your homepage. If that's what you're promoting, your legal documents should back it up. Your Terms of Service should clearly explain what the subscription includes, your service level promises (like 24/7 access), and what happens in case of service interruptions. If you're processing user data from students or educators, your privacy policy and data handling agreements must be clear and compliant.

Investors want to see consistency between what you offer and what your contracts say. If there’s a gap, it raises risk. Solid contracts show you're prepared, trustworthy, and ready to scale. Common 'no-go' clauses investors look out for include: vague or insufficient IP ownership terms, overly broad or aggressive non-compete clauses, exclusivity commitments that could restrict your ability to grow, uncapped liabilities, high or punitive contractual penalties, and exotic or one-sided termination rights. These terms introduce risk and may signal weak legal oversight.

8. Are you in a regulated industry?

Fintech, medtech, and AI, among others, in certain applications can trigger regulatory scrutiny. Investors will want to know if you’ve identified relevant laws and started the path to compliance or licensing. 

Tip: Don’t hide it, own it. Show you're aware of the regulations and have a plan. Having spoken to a regulator or begun pre-licensing procedures can actually build credibility.

Final Thought:

You don’t need a flawless legal setup, but you do need a credible, clean one. A strong legal foundation helps you build faster, partner smarter, and raise with confidence. More importantly, it shows investors that you’re not just building a great product, you’re building a real company. You're not just ready to pitch. You're ready to grow.

Need help getting there? Let’s talk.

Whether you’re raising your first round or prepping for expansion, Alfred’s team is here to make sure you’re ready.