You’ve Got VC Money: Insurance, Accounting and More

Below is a list of miscellaneous items you should complete now that you’ve raised your first significant VC round. As always, if you have any questions, please reach out to your Perkins Coie team member.

Get More Insurance Coverage

At the very least, you should already have general liability insurance. Now that you’re VC-backed, you should purchase the following insurance coverage with limits as determined by your financing agreements and discussions with your insurance broker and your board:

• Commercial General Liability.
• Directors and Officers (D&O).
• Key Person.
• Employment Liability.
• Errors & Omissions.
• Cyber Risk.
• Umbrella/Excess.

You should also discuss with your insurance broker and board other insurance coverage you might need depending on your business (e.g., property insurance, crime insurance, media insurance, automobile insurance, and workers’ compensation). Please ask your Perkins Coie team leader to make a referral from a list of preferred providers.

A separate issue is whether you require your vendors, suppliers, and contractors to carry their own insurance. This post discusses further.

Review Your Accounting Needs

As a VC-backed company, you should hire internal finance and accounting personnel for sophisticated accounting help. Your financing agreements likely require you to prepare financial statements and provide budgets to the board and certain investors on an annual, quarterly, and perhaps monthly basis. This is a significant undertaking and requires more resources and costs. Please ask your Perkins Coie team leader to make a referral from a list of preferred providers.

Also, depending upon the amount you raised in the VC round, you might need to address compliance with the Investment Company Act of 1940 and develop an investment policy for the cash you have on hand. This requires analysis from competent professionals.

Review Where You Qualify To Do Business

After you accept VC money, you should review the locations where you have employees, customers, vendors, suppliers, and other business relationships to determine whether you must qualify to do business, file official reports, or pay taxes. The bar is low for qualifying to do business in most places and failure to comply with state and local laws can result in hefty fines—and worse.

Prepare for an Influx of Paperwork

After a significant cash infusion, the number of contracts you initiate with customers, vendors, and suppliers will grow rapidly. Keeping track of the company’s obligations under those contracts is important. You should consider hiring a contracts administrator to develop or revamp your form contracts (especially with customers), develop systems for your sales team to follow (and policies for when they can deviate), and maintain and manage your records, especially with an eye toward producing and describing them for due diligence in future transactions.

As always, you should keep and maintain all company records and contracts in a secure electronic document storage system such as Dropbox, Box, OneDrive, or Google Docs. In addition, Perkins Coie provides its own electronic storage system, PC Collaborate, that is available at no cost to Perkins Coie clients. Each document should be in its final, fully executed form with exhibits compiled, and the system should be organized such that finding documents later is easy. Also, please provide your Perkins Coie team with copies of (or electronic access to) all corporate documents and contracts as they become executed to ensure they are consistently filed with the company’s electronic minute book on file at Perkins Coie.

Here’s a suggested file hierarchy for your electronic data room:

1. Corporate Records

• Charter documents.
• Minutes and consents.
• State qualification filings.
• Subsidiaries.
• D&O.

2. Capitalization and Investors

• Cap table.
• Restricted stock purchase agreements.
• Equity incentive plan documents and award agreements.
• Safes and convertible notes.
• Securities filings.
• Equity financing documents.

3. Employee and Contractor Documents

• Offer letters and employment agreements.
• PIIAs.
• Contractor and consulting agreements.
• Benefit plans.

4. Business Agreements

• Customers.
• Vendors/suppliers.
• Leases.
• Loan/credit agreements.
• Other.

5. Intellectual Property

• Founder IP assignment agreements.
• Patent applications.
• Trademark applications.
• Inbound/outbound license agreements.

6. Compliance/Regulatory

• Privacy policy.
• Website terms of service.
• Other.

7. Litigation

8. Tax

9. Financial Statements

10. Forms Library

11. Client Uploads (for sharing files with your Perkins Coie team to keep organized)