Raising Capital 101: How Counsel Supports Family Offices and Private Investors

Families and private investors raise capital for many reasons: to seed an operating company, co-invest with a sponsor, or build a direct-investment portfolio. The steps look straightforward on paper, but small drafting choices can drive outcomes for years. This overview explains, in plain language, where counsel adds value across term sheets, diligence, governance, and compliance. It is for general information and planning purposes; every transaction is different, so a brief consult with counsel is the best next step.

Start with a clear deal thesis

Before documents, align on the “why” and the “how.” What problem is the capital solving, what return profile is acceptable, and over what time frame? Are you buying control or influence, cash yield or growth, a platform or a bolt-on? Counsel helps translate these objectives into terms the other side can accept and a process the team can manage.

Term sheets that match the thesis

A good term sheet is a roadmap, not a mini-contract. It sets the economics, governance, and key protections without locking you into legal detail too early. Counsel’s job is to keep it concise and decision-ready:

• Economics: price, instrument (equity, preferred, convertible, SAFE), priority of payouts, and dividend or distribution policy.
• Downside protection: liquidation preferences, anti-dilution approach, pre-emptive rights, and information rights.
• Control points: board or manager seats, veto items, budget approval, and reserved matters sized to the risk.
• Exits: transfer rights, drag/tag mechanics, buy-sell options, and treatment on an IPO or sale.

Plain-English schedules and concrete examples reduce later disputes. If you are co-investing, counsel also helps align side letters so your rights are consistent with the lead investor’s rights.

Diligence that focuses on decision risk

Diligence should be proportionate and aimed at what could change a “yes” to a “no,” or a price change, or a covenant. Counsel narrows the scope to the items that move value or liability:

• Financial and tax: quality of earnings, working capital mechanics, debt and liens, sales-tax and payroll compliance, net operating losses, and change-of-control tax effects.
• Legal and operational: key contracts, IP ownership, employment matters, privacy and data handling, real estate, and regulatory licenses.
• Litigation and claims: pending matters, indemnities, and insurance coverage.

Findings should feed directly into terms such as price adjustments, escrow or holdback, special indemnities, or closing conditions. For repeat investors, counsel can build a right-sized diligence checklist that your team reuses deal-to-deal.

Governance that enables action

Ownership and oversight should be clear on day one. Counsel designs decision rights that fit the size and pace of the business:

• Board or manager structure: how many seats, who appoints them, and what constitutes a quorum.
• Major decisions: thresholds for debt, capital expenditures, hiring, compensation changes, M&A, and budget variances.
• Deadlock path: a short ladder from management discussion to member review to mediation, so operations do not stall.
• Reporting: cadence, contents, and rights to inspect books or meet with auditors.

For family offices, counsel also helps separate governance from family dynamics by clarifying who speaks for the investor entity and how conflicts are managed.

Compliance from day one

Capital raises touch a web of rules that vary by structure and jurisdiction. Counsel scopes the path so the process is efficient and documented:

• Securities compliance: private-offering exemptions, notices, investor suitability, and placement-agent agreements.
• Regulated sectors and data: licensing, HIPAA or other privacy regimes, export controls, and sanctions screening.
• Fund or SPV mechanics: manager authority, subscription documents, side letters, and beneficial-ownership reporting.
• Policies that matter: information-security and acceptable-use standards, including guidance on generative AI in diligence and portfolio operations.

The goal is practical: do what the law requires, avoid promises you cannot keep, and keep a clean record for auditors and future buyers.

Closing mechanics and the first 100 days

A smooth close is mostly checklists and clear signatures. Counsel coordinates closing deliverables, escrow or holdback terms, bring-down certificates, and filings. After funding, the focus shifts to execution:

• Finalize the board calendar and key performance indicator dashboards.
• Confirm bank resolutions, signing authority, and insurance changes.
• Align the budget and covenant compliance with reporting dates.
• Start the integration plan for contracts, HR, and data practices.

Common pitfalls to avoid

• Too much paper and too little clarity.
• Overbroad veto lists slow routine approvals.
• Term sheets that say “to be negotiated” on core economics.
• Diligence memos that do not feed terms.
• Side letters that quietly override the deal you thought you signed.

Counsel’s role is to surface these issues early and keep the transaction aligned with your thesis.

A practical path forward

If you are preparing to raise or deploy capital, assemble three items: a short investment memo that describes the thesis and timeline, a draft term sheet that reflects your priorities, and an initial diligence list sized to the deal. Then schedule a focused call to convert those into documents, a work plan, and a closing calendar.

If you would like a concise review tailored to your situation, CPM’s Business Law team can help structure terms, right-size diligence, set workable governance, and map compliance steps so you can move from interest to close with fewer surprises.