Startup & Venture · For investors
Legal Due Diligence for Investors in African and U.S. Startups
Before you wire money to a startup, someone should check that the company you are investing in owns the business, the IP and the shares it says it does. We review the legal records of African and U.S. startups for angels, funds and corporate investors and deliver a red-flag report ranked by severity, with the fixes to require before closing.
What we review
| Area | What we check |
|---|---|
| Corporate records | Charter, bylaws, board and stockholder consents, good standing, annual filings |
| Cap table | Every issuance traced to an approval and a signed agreement; SAFEs, notes, options and promises of equity |
| Founders | Stock purchase agreements, vesting, 83(b) status as reported by the company, departures |
| Intellectual property | Assignments from founders, employees and contractors; registrations; who actually owns the code and brand |
| Key contracts | Customer, supplier, licence and loan agreements; change-of-control and exclusivity clauses |
| Employment | Offer letters, contractor agreements, equity promises |
| Disputes | Pending or threatened claims disclosed by the company, and U.S. federal court dockets where searchable |
| Securities compliance | Form D filings and the exemptions relied on in prior rounds |
Cross-border issues we focus on
- Flip status. Is there a Delaware parent? If so, was the share exchange completed and registered at home, and does the parent really own 100% of the operating company?
- IP location. Is the IP in the Delaware parent, the local subsidiary or a founder's own name, and is there a written licence between them?
- Local approvals. Did the company obtain the local registrations its home-country counsel said were required? We review the evidence and flag gaps for confirmation by local counsel.
- Repatriation. How funds invested in the parent reach the subsidiary, and how money can come back.
- Founder visas. If founders plan to relocate to the United States, whether the structure fits an E-2 or O-1 route.
Local-law conclusions come from local counsel; we coordinate with them or with the company's counsel and say clearly which findings depend on their confirmation.
Deliverable: a red-flag report
- Red: issues that should block closing unless fixed, such as unowned IP or shares issued without approval.
- Amber: issues to fix as a closing condition or soon after, such as missing consents or late filings.
- Green: items reviewed with no material issue.
- A list of closing conditions and covenants to add to the term sheet or financing documents.
The report is written for decision-makers: a one-page summary followed by the detail. It is not an audit of financial statements, a valuation, a tax review or a legal opinion on local law.
Government and third-party costs
| Item | Amount | Notes |
|---|---|---|
| Delaware certificate of good standing | Set by Delaware | See the current fee schedule |
| Local counsel confirmations | Varies | Paid to local counsel if needed |
How it works
- Conflict check and scope: the company, the round, your check size and your deadline.
- Request list sent to the company, organised by area.
- Data-room review and follow-up questions to the company's counsel.
- Public checks: Delaware status and federal filings.
- Draft red-flag report and call with you.
- Final report and proposed closing conditions; optional term-sheet review.
Founders: getting ready for diligence
If you are raising, the same list tells you what to fix before investors look. Our outside general counsel retainer and flip service are built to leave you with a clean data room.
Who handles your matter
DC Federal Litigation PLLC performs the U.S. corporate and venture work on this page itself, from our office at 1717 N Street NW, Washington, DC, for founders and investors wherever they are. Meetings and signing happen remotely, so you do not need to travel.
We advise on U.S. law: Delaware corporate law, the U.S. transaction documents and the federal securities filings that go with them. We do not advise on the law of your home country, and we do not give tax advice. Where those questions arise, we work alongside your home-country counsel and your tax adviser, and we say in writing at the start which questions belong to them.
Before any work begins you receive an engagement letter that sets out the scope of the work, what is included and what is not.
Frequently asked questions
Why do legal due diligence on a seed-stage startup?
Because the most damaging problems at the seed stage are legal, not financial: IP that the company does not own, shares issued without approval, an unfinished flip or equity promised to people not on the cap table. A focused review is far cheaper than discovering these at the next round or on a sale.
What is a red-flag report?
A report that focuses on problems rather than describing every document. Issues are ranked red, amber or green, each with a recommended fix, such as a closing condition, a covenant or a document the company must sign. It is designed so an investment committee can read the summary in a few minutes.
Can you review a company incorporated in Nigeria, Morocco or Kenya?
We review the Delaware and U.S. side and the transaction documents, and we review local documents for consistency with them. Conclusions on local law, such as whether a registration was legally required, come from local counsel. We coordinate with them and mark which findings depend on their confirmation.
How long does a review take?
It depends on how organised the data room is and how quickly the company answers questions. We agree a turnaround with you at the start, keyed to your closing date, and tell you early if the company's responses put it at risk.
Does due diligence include tax or financial review?
No. Our review is legal. Financial statements, tax exposure and valuation should be reviewed by accountants and tax advisers. We flag legal facts that may matter to them, such as a flip that may have tax consequences at home, or convertible instruments that change the fully diluted share count, and we can share our findings with them on request.
Can you also negotiate the deal terms?
Yes. Diligence findings usually become closing conditions, covenants or changes to the documents, so it is efficient for the same team to handle both. We can review the seed term sheet or SAFE, propose the changes our findings call for, and negotiate them with the company's counsel before you sign.
Do you do diligence for founders as well?
Yes. We do readiness reviews for founders preparing to raise, using the same checklist an investor's counsel would use, so you can fix gaps before they appear in a red-flag report. We do not act for both the investor and the company in the same deal; a conflict check at intake confirms which side we can take.
Check before you wire
Tell us the company, your check size and your closing date. We confirm the scope and the turnaround. Start with a paid consultation. If you engage the firm within 30 days, your consultation fee is credited in full toward your initial retainer.