In the late 1990s, the dot-com boom sent waves of excitement through the business world. The internet was new, venture capital was flowing freely, and ambitious entrepreneurs rushed to create online businesses. But as history shows, most of those companies didn’t survive. eBay and Amazon did. And it was because they had a brilliant accounting strategy that allowed these companies to stay afloat while others collapsed.
Fast forward to today, we are witnessing a new AI boom. Just as the internet’s rise sparked a frenzy of investment, today’s AI startups are attracting capital at breakneck speed. Last year in the United States, approximately 200 billion dollars were invested through venture capital, with a whopping 33 percent of it going to AI startups. But without the right foundation, they risk losing control of their companies or making financial mistakes that could cripple them down the road. According to Jonathan Page, Founder of InPrime Legal, the single most common mistake founders make is rushing into investor agreements—particularly term sheets for growth capital. The term sheet is a battlefield where control and economics are negotiated.
The excitement of raising capital often leads founders to sign a letter of intent (LOI) or term sheet prematurely, assuming they can ‘figure out the details later.’ However, by the time legal counsel is involved, many crucial decisions have already been locked in, making it difficult—if not impossible—to renegotiate with investors.
Jonathan emphasizes that a term sheet, once signed, dictates the legal and financial structure of the deal, influencing everything from board control to future dilution of ownership. “Even though it’s technically non-binding, it sets expectations,” he explains. “Investors operate in good faith from the document, so if you realize later that you gave away too much, you’re in a very tough spot.”
According to Jonathan, one of the pitfalls for any startup is losing control of it. Many founders don’t realize that investor agreements determine who truly controls the company. The term sheet defines board composition and major actions—decisions that require investor approval before moving forward. “Investors always try to get as much control as possible,” he warns. “If they negotiate three out of five board seats, they can outvote you on key decisions. Or worse, if they secure a veto seat, one investor can block decisions even if the majority agrees.” With careful negotiation, founders can find themselves locked out of decision-making in their company.
Another common mistake is over-distributing equity—whether to employees, advisors, or investors—without thinking through long-term consequences. “Your company will always be 100% owned by someone,” the Chief Visionary of InPrime Legal explains. “As you issue more shares, you’re diluting your own stake. If you give away too much too soon, you could end up as a minority owner in the very company you built.” That is why he advocates for proactive rather than reactive involvement of legal advisors.
He shares a real-world example: “We’re currently working with a founder who only owns 10% of his company because he was too generous with early equity. Now, as he seeks growth capital, investors are reluctant to move forward because they don’t want someone who isn’t actively involved holding a significant stake.” Additionally, investors often require an option pool—a set percentage of shares reserved for future employees. This reduces the founder’s ownership even further.
At InPrime Legal, Jonathan Page and his team specialize in helping startups navigate growth capital the right way—before costly mistakes are made. They’ve successfully closed multimillion funding rounds, from seed to Series A, and are currently handling a $5+ million seed round. Their proactive legal approach helps companies avoid the traps that doom so many promising ventures.
Ultimately, the AI boom will create its own version of Amazon-like winners and dot-com era failures as per predictions. “Undisputably, entrepreneurs will first focus on the idea, the team, and the execution,” Jonathan understands. “But if you don’t get your legal strategy right, none of that will matter in the long run.”
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