Dealing with Unknown Unknowns
When System7 was founded as part of the Cocreatd incubation programme, the founding team knew they were building something with real potential. What they didn't know (what most first-time founders don't know) is that the legal foundations you build in month one can make or break your ability to sell in month twelve.
System7 went from incorporation to a seven-figure exit in under a year. That's exceptional. But what made it possible wasn't just a great product or perfect timing. It was getting the governance fundamentals right from day one.
This is a story about unknown unknowns: the critical legal and structural decisions that founders don't know they need to make until it's too late.
Every founder knows they don't know everything. You expect to learn about customer acquisition, product-market fit, and fundraising on the job. That's part of the journey.
But there's a more dangerous category of knowledge gap: the things you don't know that you don't know.
These are the structural decisions that seem like mere formalities when you're incorporating your company but turn out to be deal-breakers when you're trying to raise investment or sell the business.
The classic example? Shareholder agreements that don't align with your constitutional documents.
When you incorporate a UK company, you get standard Articles of Association. They're perfectly adequate for a simple, small company that will never take investment or undergo any corporate action.
But if you're building something ambitious (something designed to scale quickly, raise capital, or achieve a liquidity event), those standard Articles are inadequate.
Here's what founders typically don't realise:
You might have a brilliantly crafted shareholders' agreement that covers everything: vesting schedules, drag-along rights, pre-emption on share transfers, consent requirements for major decisions.
But if your Articles of Association don't reflect these provisions, you have a problem.
The Articles are your company's constitution. They're what's registered at Companies House and legally binding on the company. If there's a conflict between your Articles and your shareholders' agreement, the Articles typically prevail for matters of company law.
This creates situations where:
Venture capital and growth equity investors need specific provisions:
If your Articles don't accommodate these from the start, you'll need to amend them before investment can complete. That means:
Buyers conducting due diligence will scrutinise:
Issues here don't just slow down an exit. They can kill deals entirely. Buyers won't proceed if they're uncertain about who actually owns what.
System7 benefited from something most startups lack: proper governance architecture from day one.
Working within the Cocreatd incubation framework meant the business had access to experienced company secretarial expertise from incorporation. This wasn't about bureaucracy or box-ticking. It was about building structures that wouldn't limit the company's options later.
Investor-Ready Constitutional Documents
System7's Articles of Association were drafted from the outset to accommodate future investment rounds. When the time came to bring in growth capital, there was no need for constitutional restructuring. The framework was already there.
Aligned Shareholder Arrangements
The shareholders' agreement and Articles worked in harmony. Rights and obligations documented in one were properly reflected in the other. No conflicts, no ambiguity.
Proper Corporate Hygiene
Every share issue, every board decision, every corporate action was properly documented and filed. The statutory registers were immaculate. Board minutes evidenced clear decision-making.
Professional Advice at Inflection Points
Rather than learning expensive lessons through trial and error, System7 had expert guidance available when navigating equity structures, share issues, and corporate governance questions.
When a buyer emerged less than twelve months after incorporation, System7 was able to move quickly through due diligence.
There were no surprises. No "We'll need to fix this first" moments. No delays whilst historical paperwork was reconstructed or constitutional documents were amended.
The company was structured to sell from the beginning, even though no one knew exactly when or how an exit opportunity would materialise.
That's what good governance enables: optionality.
You might not be planning an exit in year one. But building a business that could be sold, or funded, or taken public (even if you never do any of those things) is simply good practice.
Proper constitutional documents, clean cap tables, and professional corporate hygiene don't limit your options. They expand them.
We regularly see companies delay funding rounds by 3-6 months because they need to remediate governance issues that should have been handled at incorporation.
The cost of fixing these problems isn't just professional fees (though those add up). It's the opportunity cost of delayed growth, delayed hiring, delayed market entry.
Getting it right from day one is almost always cheaper than fixing it later.
The hardest part of unknown unknowns is that you don't know to ask about them.
First-time founders shouldn't be expected to understand the intricacies of share class structures, drag-along provisions, or how to align constitutional documents with shareholder agreements.
That's why professional guidance exists.
Paradoxically, good governance makes you faster, not slower.
When you're structured properly:
Bad governance, by contrast, creates friction at exactly the moments when you need to move quickly.
For an early-stage, high-growth company, proper governance doesn't mean extensive bureaucracy. It means:
You don't need a full-time company secretary from day one. But you do need someone who knows what they're doing to set things up properly and be available when complexity increases.
If you're building a growth company, ask yourself:
If you're unsure about any of these, you're carrying unknown unknowns that could limit your options later.
System7's story isn't about getting lucky. It's about being prepared.
When opportunity knocked (in the form of a buyer who could see the business's potential), the company was able to capitalise on it because the foundations were solid.
No scrambling to fix governance issues.
No delays whilst documents were reconstructed.
No "We can't do this because our Articles don't allow it" conversations.
Just a clean, well-documented company that was ready to sell.
That's what professional governance enables: the ability to move fast when it matters most.
The things founders don't know they don't know aren't actually unknowable. They're just outside most founders' experience.
This is where professional company secretarial expertise creates real value. Not by adding bureaucracy, but by:
The best governance is invisible. It's there when you need it, enabling you to move quickly, but never slowing you down or creating unnecessary work.
System7 achieved a seven-figure exit in twelve months not in spite of good governance, but partly because of it.
The question is: is your company ready for opportunity when it arrives?
At London CoSec, we specialise in helping growth companies build proper governance foundations (without the bureaucracy).
Whether you're incorporating and want to get it right from day one, or you're preparing for investment or exit and need to ensure your corporate housekeeping is investor-grade, we can help.
Get in touch: contact@londoncosec.com
About the Author
Lysandros Lysandrides is a Chartered Secretary and qualified lawyer with over 20 years of experience advising growth companies on company secretarial matters and corporate governance. He is the founder of London CoSec and a member of the Chartered Governance Institute UK & Ireland.
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