Fundraising isn’t only about your product and growth curve- investors also assess governance maturity. D&O Insurance is one of the clearest external signals that leadership understands accountability and has planned for disputes that can arise from shareholders, employees, regulators, or other stakeholders.

Here’s why founders should consider D&O before term sheets start flying around.

1) It protects founders’ personal assets (not just the company’s balance sheet)

When allegations involve wrongful acts, actual or alleged- directors and officers can be named individually. D&O is designed to help with:

• Legal defence costs
• Settlements and damages (where insurable and as per policy terms)
• Costs associated with responding to certain claims

The key point: incorporation reduces some risk, but it doesn’t make personal naming impossible. D&O helps create a defence buffer around leadership.

2) It builds investor confidence and reduces friction in diligence

Many investors ask risk-related questions during diligence: board structure, audits, IP hygiene, compliance posture- and sometimes insurance. Having D&O in place can:

• Signal governance seriousness
• Reduce last-minute negotiation pressure
• Make it easier to onboard independent directors (many prefer boards with D&O)

Even when investors don’t explicitly require it, D&O can prevent the scramble where you buy a policy under time pressure with poor terms.

3) It supports regulatory defence (subject to policy wording)

Startups can face regulatory scrutiny for many reasons- complaints, reporting issues, employment disputes, customer allegations, or sector-specific compliance questions. Even if you believe you did nothing wrong, responding can be expensive and time-consuming.

D&O may help manage legal costs in certain situations, depending on:

• The insuring clauses
• Definitions (wrongful act, claim, insured person)
• Exclusions and endorsements
• Applicable laws and policy conditions

This is where “policy wording” is everything- don’t rely on assumptions.
Statutory fines and penalties may not be insurable under Indian law, even if defence costs are covered.

Quick takeaway for founders

Fundraising multiplies stakeholders. More stakeholders mean more governance pressure, and more routes for claims. Buying D&O early is often less about fear and more about being investment-ready.

If you want, tell me your expected round size and whether you have ESOP + senior hires; I’ll suggest a simple “D&O readiness” checklist you can use in diligence.