Technology entrepreneurship and law intersect in critical ways, as seen in recent research by Dr. Yifat Aran on venture capital practices, startup governance, and employee compensation. Venture capitalists face a “due diligence dilemma” characterised by the tension between rapid investment expectations and the need for rigorous independent checks. When market conditions promote speed, investors sometimes rely on the reputation of co-investors instead of direct verification, which can lead to problems for stakeholders who rely on the signal VC investment provides.​

Legal frameworks often allow private parties to set their own terms, but this may not protect broader interests or prevent harms resulting from inadequate diligence. Governance within startups is shaped by both financial backers and the engineers and founders powering the company. Notably, founder-CEOs, even those with substantial control, can be pressured to step down due to poor performance or other countervailing factors.

Employee equity compensation is another area where legal clarity is crucial. Regulations may not always require companies to provide adequate information to employees holding equity, risking misinformed decisions. Recommendations have been made for legal reforms that strengthen transparency and align corporate law with the realities of startup growth, highlighting the need for specialised legal expertise and updated court practices to keep pace with the evolving tech ecosystem.

Citation:

Aran, Yifat, and Geslevich Packin, Nitzan, Due Diligence Dilemma. U. Ill. L. Rev. 101, 2025.

Pollman, Elizabeth, and Aran, Yifat, Ousted. 25 Theoretical Inquiries L. 231, 2024.

Aran, Yifat, Making Disclosure Work for Start-Up Employees. Colum. Bus. L. Rev. 867, 2019.

Aran, Yifat, The RSU Time Bomb: Regulating Startup Equity Compensation in the Unicorn Era, in Research Handbook on the Structure of Private Equity and Venture Capital. Edward Elgar Publishing, 2024.