Lisbon investment Summit: Catarina Prata on Cross-Borders Investment

June 4, 2019

After pursuing her education in both Portugal and the U.S., Catarina became a legal advisor for social causes. She recently joined the startup world by becoming General Counsel at SWORD Health – a startup shaping the future of physical therapy, that recently raised a $9 Million round led by Koshla Ventures.

She’ll be joining Lisbon Investment Summit this week for a panel on Cross-border Investments – but she took the time to share with us her experience.

When raising investment, what are the more common mistakes founders make in the legal department?

Not properly listening to the General Counsel! (laughs) I’m kidding. I’m new in the business, but it appears to me that start-ups do not have an in-house legal team when this type of investment comes along. I might sound biased, but I’d advise all founders out there to have one or to have a good and close relationship with someone from the legal universe.

When we’re dealing with cross-border investments, the differences between legal orders might get easily overlooked. We’re dealing not only with different branches of law that must work harmoniously, but also with different national laws, and even with different legal systems. Take Sword, where we dealt with civil law v. common law. Another rookie mistake founders tend to make is to be lenient when it comes to choosing the law firm to work with them. In our case, we lost an entire month until we brought ML on board to help us make things go forward. Timing is very important when you deal with US investors: their pace is way faster than Europeans’, and we risked losing their interest because of how long things were taking.

What should founders take into consideration when building the legal structure of their business?

They should have a clear idea of what type of company they want to have, and to where they want to lead the project. It is very easy, and sometimes necessary, to make concessions that might work in the short-term, but bring problems for the long-haul. Investors and founders would be, ideally, aligned, but that isn’t often the case. It is important for founders not to lose track of what drove them to start the business. To keep that belief in your project is fundamental, from what I’ve learnt so far. I know I digressed from the legal point, but that has a reason. The legal structure and dynamic that ultimately rise are intimately related with the commitment that founders have with their original idea. Law is a tool, not a work-product.

What is, in your opinion, the steps founders must take in order to protect themselves and the company, when taking foreign investment?

I would point the following: 1) to know whether your company is ready to face an investment round; 2) to have a clear idea of what kind of investor you want to attract; 3) to discuss in depth with your GC the tax implications of taking foreign investment, both from an individual and from a company’s perspective; 4) to have the emotional stamina to face the process; 5) to keep your GC in the loop of all the steps you take in order to avoid unpleasant surprises that might sound great from the business perspective, but can be a thing from the legal perspective. I’m aware of the fame the legal teams have…we are the fun spoilers! (laughs)