Disclosure letter

Hello startup enthusiasts!

Valentine’s Day may be over, but when it comes to fundraising, there’s still one love letter that matters—your?disclosure letter. It might not be the most exciting part of the process, but it’s one of the most important. Done right, it protects you, builds trust with investors, and keeps your deal on track. Let’s dive in.

What’s a disclosure letter?

Think of a disclosure letter like a?pre-flight checklist?for your investment round. Your investment agreement includes?warranties—promises about your company’s shape. But what if there’s more to the story? Maybe there’s an unresolved lawsuit, a pending IP registration, or a contract with unusual terms. Instead of letting investors find out later (which could derail the deal), you?disclose it upfront.

A?well-prepared disclosure letter?contains:

General disclosures?– Broad statements, like stating that all publicly available company records or due diligence materials have been fully disclosed.

Specific disclosures?– Details about exceptions to warranties, like an ongoing legal claim, an unresolved IP issue, specific data privacy breach or a supplier contract with unusual terms.

Why does this matter?

A disclosure letter isn’t just a legal box to tick—it’s a?trust-building tool. Investors aren’t looking for a perfect company. What they want is a founder who?understands risks, owns them, and communicates openly.

Miss something important, and you risk?misrepresentation claims, deal renegotiations, or even investors walking away. But if you’re upfront, you?stay in control, prevent last-minute surprises, and show you’re prepared.

Dos and don’ts

Dos

• Make sure you know every warranty and disclose any exceptions. If it’s in your investment agreement, it should be in your disclosure letter—no gaps, no surprises.
• Group disclosures into categories like legal, financial, contracts, and IP so investors can easily review them.
• Be specific about risks, instead of saying?"Everything looks fine legally,"?say?"One ongoing employment dispute, expected resolution Q3."

Don’ts

• Reuse old disclosure letters without updating them.?Every funding round is different, so update your disclosure letter to reflect your company’s current state.
• Rush the process—skipping details now can cause last-minute problems, delays, or even put your deal at risk.
• Leave out key documents—if you mention a pending lawsuit or an unresolved IP issue, include contracts, legal opinions, or timelines, because investors will ask for them.

In a nutshell

A disclosure letter isn’t just another formality—it’s a?smart move. By being open about your company’s situation, you?protect yourself, build trust with investors, and make the deal process smoother. The clearer and more honest your disclosures, the fewer problems you’ll face later.

Want to know more about disclosure letters or other investment essentials??We’re here to help.?Reach out?or follow us on?LinkedIn?for more insights.

See you next month!