How Deep-Tech Funds Invest: Instruments, Due Diligence and Legal Risks (EU/CZ)

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
9.6.2026 | ARROWS law firm

This article provides a practical overview of how deep‑tech funds operate, how they assess science-based startups, and which investment instruments they use. You will learn which legal and regulatory details investors and founders need to watch out for. The text is based on Czech and European law as of 2026 and shows when it is appropriate to involve experienced attorneys from ARROWS, a Prague-based law firm.

The photograph shows an expert consulting on investments in deep-tech projects.

Investments in scientific and deep-tech startups today represent one of the few segments where investors can achieve above-average returns over the long term, but at the cost of significantly higher technical and regulatory uncertainty. At the same time, both the European capital market and fund regulation have been changing dynamically in recent years—from the Czech Act on Investment Companies and Investment Funds (ZISIF) to the AIFMD II Directive, whose transposition into the Czech legal system is already fully effective as of 2026.

Key takeaways

Scientific and deep‑tech startups are built on breakthrough research, not fast marketing. They have long development cycles, high technical uncertainty and often significant regulatory barriers, which fundamentally affects how they are financed and how the funds investing in them operate.

Deep‑tech funds are most often structured as alternative investment funds under the European AIFMD Directive and the Czech ZISIF, or under the simplified registration regime pursuant to Section 15 of ZISIF. Although this regime has lower administrative requirements than a full licence, it is associated with strict marketing restrictions and a ban on approaching the general public.

For founders of scientific startups, the key elements are the terms in the investment agreements—especially the regulation of intellectual property (IP) rights, liquidation preferences, anti‑dilution mechanisms and protective provisions. These terms determine how proceeds are distributed upon exit and how much control the founding team retains over time.

Investors in deep‑tech funds should thoroughly review not only the fund’s strategy and the identity of the manager, but also compliance with regulatory obligations under the current rules. Mistakes in this area may lead to intervention by the Czech National Bank (CNB), a blocked fundraising process, or subsequent litigation.

What scientific and deep‑tech startups are and why they are financed differently

Scientific and deep‑tech startups differ from ordinary technology companies in that their value is based primarily on deep scientific or engineering know‑how, rather than on the rapid implementation of existing technologies into a new business model. They typically operate in areas such as artificial intelligence, quantum technologies, advanced robotics, biotechnology, materials engineering, energy, or space technologies.

According to MIT REAP and other leading institutions, these are often projects that originate in an academic environment. These projects leverage the results of many years of research and generate hard-to-replicate know‑how and specific intellectual property.

A key feature of deep‑tech startups is that they primarily bear technical risk, while market risk tends to be relatively lower—if the scientific problem can be solved, the market typically exists and is sufficiently large. This is a fundamental difference from many classic startups, where the technology is relatively simple but customer demand is uncertain.

In deep‑tech projects, by contrast, the main question is whether the solution can be brought—technologically and from a regulatory perspective—to a product that can be placed on the market. The consequence is a significantly longer development timeline. Many deep‑tech startups need years of pure research and development, clinical trials, certifications or pilot installations before they reach meaningful revenues—in biotechnology or new energy, this can typically be 7 to 10 years.

During this period, they repeatedly need external capital, which practically rules out bank financing. As a result, venture capital through specialised funds and public grant schemes is the primary source of funding.

From the perspective of both investors and founders, it is important to understand that the usual fast metrics such as user growth or monthly recurring revenue (MRR) often do not make sense here. Instead, R&D milestones, the status of patent proceedings, successful prototypes, pilot project results, or regulatory steps are tracked.

The legally binding setting of these milestones in investment agreements and their enforceability is a typical area where ARROWS, a Prague-based law firm, helps negotiate a balance between investor protection and the real capabilities of the scientific team.

Deep‑tech project specifics from an investor’s perspective

From an investment perspective, deep‑tech startups represent significantly higher risk than standard corporate loans or investments in more mature companies. A study by the European Investment Bank shows that for companies based on key enabling technologies, the annual portfolio loss rate can be around 15–20%.

This explains why deep‑tech financing primarily relies on specialised funds with a high tolerance for risk. In addition to the probability of failure itself, time is also a crucial parameter. If a deep‑tech startup has an annual survival probability of, for example, 80%, then the probability that it survives 5 years is mathematically approximately 33% (i.e., only one third).

For an investor, this means they must assume with a high probability that many projects will never reach an exit stage, and the return of the entire portfolio must be delivered by only a few successful companies.

Deep‑tech projects also often operate in heavily regulated sectors such as medical devices, human medicinal products, energy infrastructure, defence technologies, or the financial sector. This means not only more complex licensing and permitting processes, but also a higher risk of regulatory changes.

Our attorneys in Prague at ARROWS typically assess in these cases whether the startup can realistically obtain the required permits and which licences are necessary for operations. It is also necessary to mention the aspect of high capital expenditure. In deep‑tech projects, the capital required for prototyping, laboratory equipment or pilot projects is often significantly higher than in purely software startups.

Negotiating how large an investment reserve the fund plans and under what conditions it will use it is another key topic of the contractual setup in which our attorneys in Prague at ARROWS assist clients.

Links to universities and technology transfer

A large proportion of deep‑tech startups are established as so-called university spin‑offs or spin‑offs from public research organisations. A typical scenario is that a research team developed a new technology as part of a research project, the university had it patented, and is looking for a commercial route to monetise it.

This creates a new startup that obtains a licence from a research institution to use research results in exchange for licence fees and often also an equity stake in the newly established company. From a legal perspective, the technology transfer process is exceptionally complex. Under the Czech Civil Code, the Copyright Act and the Patent Act, it is necessary to define precisely what is covered by the licence, whether the licence is exclusive, for which territory and field of activity it is granted, and how the licence fees are structured.

An improperly structured licence agreement with a university may result in professional investors refusing to enter the startup because ownership of the intellectual property will be unclear.

It is also essential to set up internal relationships between the founders and the startup properly. Each member of the development team must have an agreement with the company for the assignment of rights to the results of intellectual activity or for the exercise of rights to an employee work, in order to avoid a situation where a key developer personally claims rights to the technology.

The attorneys at ARROWS, a Prague-based law firm, prepare founders’ agreements, equity vesting arrangements, employment agreements as well as agreements with external suppliers, so that IP ownership is absolutely clean for future investors.

Another important topic is the protection of trade secrets and know-how that cannot be protected by a patent or where patent protection is not strategically appropriate. For a certain set of information to be legally protected, the company must demonstrably adopt appropriate technical, organisational and legal measures to keep it confidential.

Neglecting these preventive legal steps may result in the loss of trade secret protection, which can fatally jeopardise the value of the entire company.

Basic types of funds for financing deep-tech projects

Venture capital and alternative investment funds (AIFs) under the AIFMD Directive and the ZISIF Act are typically used to finance scientific and deep-tech startups. However, with deep-tech projects it is necessary to plan for a longer investment horizon and a highly specialised team with deep expertise to assess technical quality.

In the Czech Republic, in practice we encounter two regimes. The first is a fully licensed fund of qualified investors (FKI) under the direct supervision of the Czech National Bank (ČNB). This structure targets institutional investors and offers the highest level of credibility, albeit at the cost of higher establishment and compliance expenses.

The second regime is registration under Section 15 of the ZISIF Act, used for smaller funds and club platforms. It allows asset management without a full licence, based only on registration with the Czech National Bank (ČNB). However, this more flexible approach comes with strict limits, in particular an absolute ban on public offering and a cap on the volume of assets under management.

Venture capital funds and deep-tech strategy

Venture capital funds invest in private, young companies with high growth potential, and investors accept that most projects will fail. A typical structure includes an active manager (GP) and passive investors (LPs). The GP is incentivised to maximise returns through a combination of a management fee and a share in profits.

For deep-tech funds, the standard fund life is often insufficient, so the investment horizon is commonly planned for 12 to 15 years. When establishing a fund, it is crucial to model its economics in detail and set the contractual structure so that it reliably protects and aligns the interests of both sides.

This strategy is also often associated with narrow sector specialisation. In Europe and in the Czech Republic, in recent years an increased inflow of capital can be observed particularly into specific areas such as cybersecurity and defence technologies.

The fund’s specialisation is important for investors, but it also has legal implications – investments in sensitive technologies and the defence industry may be subject to a strict foreign investment screening regime.

Alternative investment funds in the Czech environment (ZISIF)

The Czech legal framework for venture capital is set by the ZISIF Act (implementing the AIFMD Directive), which regulates both licensed funds of qualified investors (FKI) and the popular registration regime under Section 15 of the ZISIF Act. This regime is not subject to direct supervision by the Czech National Bank (ČNB) and does not require a depositary.

However, a manager under Section 15 of the ZISIF Act must not conduct a public offering and may raise funds only from qualified investors. The legislation also strictly prohibits using the word “fund” in the name and requires the designation “venture capital entity” to prevent misleading the public.

By contrast, licensed FKIs face higher compliance costs, but provide investors with a substantially higher level of legal certainty. The attorneys at ARROWS, a Prague-based law firm, therefore always analyse the client’s plan in detail and recommend the optimal structure based on the objectives and marketing strategy.

Related questions

1. How do I know whether my project requires a fully licensed fund of qualified investors (FKI), or whether registration under Section 15 of the ZISIF Act is sufficient?
The decisive factors are primarily the planned volume of assets under management, the investor structure and the way they are approached. If you plan to raise funds from a smaller circle of known, creditworthy investors and total assets will not exceed the equivalent of EUR 100 million (or EUR 500 million for closed-ended structures without leverage), registration under Section 15 of the ZISIF Act (as a venture capital entity) is a cost-effective solution. However, if you target institutional investors, plan public marketing or want to use the benefits of the European passport for distribution abroad, it is necessary to establish a fully licensed FKI.

2. Is the designation “venture capital entity” merely a formality, or does it have broader implications?
The designation “venture capital entity” is a mandatory statutory element of the business name of an entity entered in the list under Section 15 of the ZISIF Act. Its practical effect is a clear warning to investors that they are investing in an unregulated and highly risky structure. The ban on using the word “fund” is also essential. Breaching these rules in business dealings or marketing is considered a serious administrative offence, with the risk of high fines and removal from the Czech National Bank (ČNB) register.

3. Can a deep-tech fund established abroad (e.g., in Luxembourg or Estonia) safely invest in Czech startups?
Yes, foreign funds can invest in Czech companies without restrictions. However, it is necessary to ensure proper structuring of cross-border tax flows, take into account foreign investment screening rules (if the investor comes from a third country outside the EU), and comply with any notification obligations when offering the fund cross-border to Czech investors. Thanks to the international network of ARROWS International, we can effectively coordinate and legally secure these cross-border structures.

How funds select scientific and deep-tech startups

The investment selection process in deep-tech funds differs from investing in standard software platforms. Given the technical risk, due diligence shifts towards in-depth technology analysis.

At the same time, venture capital funds are not scientific grant agencies – each investment must demonstrate clear commercial logic and a realistic potential to generate returns upon a future exit.

Investment criteria: technology, team, market

When assessing scientific startups, fund investment committees focus on three core pillars: technology, team and market potential.

For the technology, its scientific uniqueness, Technology Readiness Level (TRL), the existence of patent protection, and overall defensibility against competitors are assessed. Funds look for projects that have built a strong barrier to entry in the form of patents and know-how.

Scientific startups often suffer from an imbalanced team composition. The founding team is typically made up of excellent scientists and academics, but they lack business experience, financial management, and the ability to lead commercial negotiations. For a fund, it is crucial whether the scientific founders are willing to bring experienced managers into the team.

Even the best scientific technology is worthless from a fund’s perspective if there is not a sufficiently large commercial market for it. Given the absence of financial history, specific methods are used to value deep-tech startups. Instead of EBITDA multiples, a combination of qualitative methods and an estimate of the company’s future value at exit is applied, based on market potential discounted by a high level of risk.

Legal and IP due diligence for scientific startups

A key part of the review of any deep-tech startup is legal and IP due diligence. The aim is to verify whether the company has the full and unrestricted right to commercially exploit the technology. The origin of ownership, patents, know-how protection, and the relationship to academia are examined—especially whether the technology was created at a university without proper settlement of rights.

In addition, commercial due diligence is carried out, assessing the viability of the business model and competitive advantages. It provides investors with an independent view of whether the declared technical parameters have real market value for end customers.

In practice, the attorneys at ARROWS, a Prague-based law firm, work closely with technical and commercial auditors. They then properly reflect the results of the reviews in the investment agreement, for example through specific representations and warranties or conditions precedent.

Related questions

1. Is it necessary to have a fully granted patent before a fund invests, or is a filed patent application sufficient?
Granting a patent is a lengthy process that in some fields can take several years. In early funding stages (pre-seed, seed), funds are therefore typically satisfied with a filed patent application accompanied by a positive prior-art search report. The key is to have a clear patent strategy in place and to ensure contractually that the rights to the application fully belong to the startup, not to the scientists as individuals.

2. What is the most common legal problem (deal-breaker) when reviewing university spin-offs?
The most common obstacle is unclear settlement of intellectual property rights between the university and the startup. We often encounter situations where the academic institution grants the startup only a non-exclusive licence or reserves the right to withdraw the licence if the startup fails to secure further funding within unrealistic deadlines. Another frequent issue is the absence of the university’s written consent to the commercial use of research results that were co-financed from specific public or European grants, where the subsidy conditions restrict commercial use.

3. How can the risk be legally addressed in practice that a key scientific founder leaves the startup after the investment is obtained?
This risk is typically addressed through a combination of two legal tools: reverse vesting of shares (the founder obtains full disposal rights to the stake only after a certain period of active involvement in the company, e.g., 3 to 4 years) and a strict non-compete clause during participation in the startup and for a defined period after leaving it. If the founder leaves earlier, the company or the remaining shareholders have the right to buy back the unvested stake at nominal value.

Investment structure: how a fund invests in a deep-tech startup

The implementation of the investment itself and the fund’s equity entry into a deep-tech startup require robust contractual documentation.

Although the continental legal environment is based on the principles of freedom of contract, in venture capital the standards derived from Anglo-American law have prevailed, and these must be adapted to Czech law.

Term sheet, valuation and equity vs. convertible instruments

The first formal step of the transaction is signing a document called a Term Sheet. It is a structured summary of the basic commercial and legal parameters of the planned investment. With the exception of specific provisions on exclusivity and confidentiality of information, the Term Sheet is not legally binding; however, in practice it carries enormous moral and negotiating weight.

When structuring the investment, a choice is made between two basic approaches. The first is a direct equity investment (equity round), where the fund subscribes for newly issued shares in the company’s registered capital. Along with this, an Investment Agreement and a Shareholders’ Agreement are signed, which regulate the mutual rights and obligations of the shareholders.

The second approach involves convertible instruments. In early stages, when it is difficult to determine valuation, convertible loans or SAFE-type agreements are often used. These instruments work so that the investor provides funds immediately, while their conversion into an equity stake occurs only in the future upon the occurrence of a defined event.

In the Czech legal environment, SAFEs do not have direct statutory regulation, and therefore they are structured as innominate contracts with a condition precedent for a future subscription of shares. It is essential to set up the cap table so that the founders remain motivated in the long term by a significant equity stake.

Liquidation preference, anti-dilution and protective provisions

The key protective mechanisms that investment funds typically define in shareholders’ agreements (SHA) are liquidation preference, anti-dilution protection, and protective provisions. The market standard is the so-called 1x non-participating liquidation preference, where the investor has the right to receive back its invested amount in priority over others.

Anti-dilution protection protects the investor if the company raises additional capital in the future at a lower valuation—this is a so-called down round. In practice, two methods are used to calculate this protection: the stricter Full Ratchet and the fairer Weighted Average.

Protective provisions form a catalogue of key decisions that neither the company’s management nor the general meeting may make without the investor’s prior written consent. Typically, these include amendments to constitutional documents, issuance of new shares, approval of the annual budget, or dealing with key intellectual property.

Governance, board seats and venture debt

The Shareholders’ Agreement (SHA) regulates the company’s governance and management (corporate governance) in detail. The standard is that, in addition to executive directors, a supervisory board is established, in which the investor has the right to appoint a defined number of seats. For deep-tech projects in later stages of development, an interesting financing alternative may be so-called venture debt. This is a specialised credit instrument combined with the issuance of option rights to acquire an equity stake in the company on preferential terms.

Venture debt makes it possible to extend the financial runway to the next investment round without the need for immediate dilution of the founders’ shares; however, it brings strict contractual covenants, the breach of which may lead to the loan becoming immediately due and payable.

Related questions

1. What is the practical difference in the Czech Republic between a convertible loan and a SAFE agreement?
A convertible loan is legally classified as a loan, which means it creates a debt relationship. If no conversion occurs, the startup is obliged to repay the loan principal including interest to the investor. A SAFE, by contrast, is not debt; it carries the right to a future issuance of equity interests, and if the project fails, the invested funds are not repaid. In Czech practice, a SAFE must be structured very carefully with regard to Czech corporate law.

2. Can employee share option plans (ESOPs) be implemented effectively in a Czech limited liability company (s.r.o.)?
Yes, under Czech conditions it is possible to implement an ESOP in an s.r.o., but due to the rigidity of recording ownership interests in the Commercial Register, so‑called virtual (shadow) ESOPs are more commonly used. Under these, employees do not acquire an actual interest in the registered capital, but rather a contractual claim to a financial payment derived from the increase in the company’s value or a share in the proceeds from a future sale of the company.

3. What are the risks for founders associated with an overly broad catalogue of protective provisions?
An overly broad list of matters requiring investor consent can paralyse a startup’s day-to-day operations. If managing directors must request investor consent for every purchase of laboratory materials above a set threshold or for signing a standard commercial agreement, the company loses flexibility. The attorneys at ARROWS, a Prague-based law firm, recommend setting financial thresholds for reserved matters in a differentiated way depending on the company’s stage of development.

How a deep‑tech fund works from the perspective of investors and founders

The operation of an investment fund for deep‑tech projects is defined by strict contractual relationships between its founders (GP) and investors (LP), as well as by the external regulatory framework of the Czech National Bank (ČNB) and European law.

Investor (LP) perspective: return, risk and regulation

By entering the fund, the investor (LP) undertakes to provide capital upon the manager’s call (Capital Call) up to the amount of its total investment commitment. Investing in deep‑tech funds is highly illiquid—the capital is locked in the fund for its entire lifetime with no possibility of early redemption. On the other hand, European legislation significantly strengthens investor protection. The AIFMD II Directive introduces stricter rules for risk management and fee transparency.

For so‑called lending funds, European legislation sets fixed limits on leverage and an obligation to retain a share of the risk. For investors in the Czech Republic, investing through funds of qualified investors (FKI) brings significant tax advantages. If the fund meets the statutory conditions of a so‑called basic investment fund, its income is subject to a preferential 5% corporate income tax rate.

Founder perspective: what to realistically expect from a fund

The relationship between the startup and the fund does not end after the investment is made—on the contrary, it begins. Founders must expect that a professional fund will require strict financial and operational reporting.

The fund also actively helps build strategic partnerships, identify key employees, and prepare for further, larger investment rounds. Founders should bear in mind that while the fund’s representative on the board is meant to support the company’s growth, they also have statutory duties towards the fund itself.

In the event of disagreements over the company’s strategy, tensions may arise, which must be addressed in advance through clear deadlock resolution mechanisms.

Potential issues

How ARROWS helps (office@arws.cz)

Inappropriately chosen fund structure : The manager chooses a structure that does not correspond to the size of assets under management or the type of investors, leading to disproportionate costs.

The attorneys at ARROWS, a Prague-based law firm, will assess your plan and propose the optimal fund structure. They will compare the benefits of registration under Section 15 of ZISIF with a licensed FKI and will handle the process with the Czech National Bank (ČNB).

ČNB sanctions for unauthorised marketing : A manager operating under the Section 15 ZISIF regime unintentionally breaches the prohibition on public offering (e.g., through presentations on a website or at conferences).

We will review all marketing materials, presentations and websites. We will set internal guidelines for approaching investors and represent you in any proceedings before the Czech National Bank (ČNB).

Unclear origin and protection of IP in a spin-off : There is a risk of disputes with a university or former developers, which blocks the fund’s investment.

We will carry out a complete legal audit of intellectual property ownership. We will align licence agreements with universities, prepare watertight employment agreements, and ensure the lawful transfer of rights.

Unfavourable investment terms for founders : Aggressive liquidation preferences or full‑ratchet anti‑dilution deprive founders of motivation and returns at exit.

We help founders and funds negotiate a fair Term Sheet. We will prepare the subsequent transaction documentation in line with international standards and Czech law.

Non-compliance with the new AIFMD II legislation : The fund does not meet the tightened requirements for substance, risk management, or loan-origination limits.

We will review the fund’s internal rules and delegation agreements. We will adapt the fund’s operations to the current AIFMD II requirements effective in 2026.

Regulatory and contractual nuances to watch out for

Investments in technological and scientific projects require familiarity with highly specialised legal regulations that go beyond the scope of standard commercial law.

AIFMD II, ZISIF and changes in recent years

In 2026, the rules of the AIFMD II Directive are already fully implemented, bringing fundamental harmonisation of rules for managers across the EU. The fund manager must demonstrate in detail to the Czech National Bank (ČNB) that it has sufficient personnel and technical resources in the country of its registered seat. At the same time, the rules on conflicts of interest and asset valuation have been tightened. 

Managers must have independent processes in place for valuing illiquid assets, and valuations must be performed at least once a year.

In the domestic environment, it is necessary to continuously ensure strict compliance with anti-money laundering rules. Fund managers and registered persons must carry out thorough client identification (KYC), identify beneficial owners, and verify the source of funds.

Screening of foreign investments and sensitive sectors

For deep‑tech startups developing technologies usable in critical infrastructure, cybersecurity, energy, or that qualify as dual-use goods, it is essential to take into account the Czech Act on the Screening of Foreign Investments. If a foreign investor (based outside the EU or EEA) plans to acquire direct or indirect influence in a Czech company operating in a sensitive sector, the transaction is subject to approval.

If a foreign investor plans to acquire influence in a Czech company operating in a sensitive sector, the transaction is subject to approval by the Ministry of Industry and Trade of the Czech Republic. Completing the investment without this prior authorisation entails the risk of invalidity of the entire transaction, the imposition of high fines, and an obligation for the investor to forcibly divest the interest.

The attorneys at ARROWS, a Prague-based law firm, therefore carry out due diligence checks to determine whether the target startup falls within the scope of this Act and, where necessary, ensure a smooth approval process.

Tax and cross-border aspects

When structuring international investments, it is necessary to take into account tax implications in several jurisdictions at the same time. A key issue is preventing double taxation of dividend flows and capital gains upon exit.

In the Czech Republic, income from the sale of an interest in a subsidiary by a parent company is fully exempt from corporate income tax, which is a major advantage for holding and fund structures. For individuals, to qualify for an exemption of income from the sale of an interest from income tax, it is necessary to meet a time test of 3 years for shares and 5 years for interests in an s.r.o.

Related questions

1. What specific “substance” (operational presence) requirements does AIFMD II bring for Czech fund managers in 2026?
The AIFMD II Directive requires that a fund manager employ or have available at least two natural persons who are tax residents in the EU and have sufficient qualifications to perform management and control functions. It also applies that delegating key activities to third parties outside the EU is subject to strict notification to the Czech National Bank (ČNB) and must not result in the manager becoming a mere formal shell without real influence over decision-making.

2. Is a startup developing software for autonomous drones subject to mandatory foreign investment screening in the Czech Republic?
With a high degree of probability, yes. Autonomous drones and software for their control have the nature of dual-use goods (usable in both the civilian and military sectors) and may fall into the category of critical technologies. If such a startup were to be invested in by a fund whose ultimate investors come from countries outside the EU, it is necessary to file an application for a review of the transaction with the Ministry of Industry and Trade of the Czech Republic before completing the investment.

3. What tax pitfalls arise from cross-border provision of venture debt loans to Czech startups?
The main tax pitfall is withholding tax on interest. If a foreign lender provides a loan to a Czech startup, the interest paid is subject to withholding tax in the Czech Republic unless the rate is reduced or eliminated under the relevant double taxation treaty. The contractual documentation must address these withholding taxes through tax gross-up clauses.

Final summary

Investments in scientific and deep-tech startups represent a fascinating segment of the capital market with enormous growth potential, but also with exceptional complexity. Success in this area requires absolutely precise contractual arrangements, thorough verification of intellectual property rights, and strict compliance with increasingly stringent financial regulation.

For startup founders, fund managers, and investors (LPs) alike, even the smallest formal mistake can mean fatal financial losses. Any error in licence agreements, breach of the prohibition on public offerings, or failure to conduct foreign investment screening may result in the entire transaction being derailed.

The attorneys at ARROWS, a Prague-based law firm, have long specialised in transactional and regulatory law in the area of venture capital, the establishment of fund structures, and the protection of intellectual property. If you are planning to establish an investment fund, invest in a startup, or transfer technology, please do not hesitate to contact our specialised team at office@arws.cz.

FAQ

1. I want to invest as an individual in a deep-tech fund registered under Section 15 of the ZISIF. What conditions must I meet to be considered a qualified investor?
Under the ZISIF, you must meet two basic conditions: make a written declaration that you are aware of the risks associated with investing in this fund, and either invest at least CZK 3,000,000 (without the need for further testing), or invest at least CZK 1,000,000 if the fund manager carries out an appropriateness test and confirms that this investment corresponds to your financial background, knowledge, and experience.

2. Can a person entered in the register under Section 15 of the ZISIF (a venture capital entity) establish sub-funds with different investment strategies?
No, in the Czech Republic, sub-funds may be established only by licensed investment funds, most commonly in the form of a joint-stock company with variable registered capital (SICAV). A person registered under Section 15 of the ZISIF manages assets as a single whole and cannot create separate sub-funds, which limits its ability to offer investors different specialised strategies within one entity.

3. What exactly does the term “freedom to operate” (FTO) analysis mean, and why is it so important for deep-tech investors?
An FTO analysis is a legal-technical assessment that determines whether the commercial use of a startup’s technology (manufacture, sale, import) will not infringe valid patent claims of other entities in the given market. The fact that a startup has filed for, or even been granted, its own patent does not automatically mean that, in implementing it, it is not infringing an older and more broadly drafted patent held by someone else. An FTO analysis minimises the risk that the company will be blocked after entering the market by lawsuits from competitors.

4. How does the AIFMD II Directive affect the provision of shareholder loans by funds to their portfolio startups?
The AIFMD II Directive introduces specific rules for so-called loan origination (lending by funds). Shareholder loans are excluded from these strict limits provided that the total value of loans granted does not exceed 90% of the net asset value (NAV) of the relevant fund. However, if the fund were to start providing loans systematically to third parties outside its portfolio, it would have to meet strict organisational and diversification requirements.

5. We are a scientific team at a university and want to establish a spin-off. When is the best time to prepare a Founders' Agreement?
The Founders' Agreement must be concluded before the formal establishment of the s.r.o. and before signing the licence agreement with the university. The Founders' Agreement must clearly define the ownership arrangements among the scientists, the division of roles (who will be the executive director, who will remain only a scientific advisor), the commitment to exclusivity of time devoted to the project, the mechanism for vesting of interests, and, above all, an agreement on which specific personal rights and intellectual property the scientists will transfer to the new company.

6. What is the role of a depositary in a licensed fund of qualified investors (FKI), and why does this obligation not apply under registration under Section 15 of the ZISIF?
A depositary is an independent financial institution (typically a bank licensed by the Czech National Bank (ČNB)) that supervises the fund’s activities. The depositary records the fund’s assets, checks whether purchases and sales of assets comply with the fund’s statutes, and approves all cash flows. Under registration under Section 15 of the ZISIF, this obligation does not apply in order to reduce administrative and financial costs for smaller managers; however, investors in this regime must accept higher risk because the handling of funds depends exclusively on the integrity of the manager.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the topic based on the legal status as of 2026. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for the maximum safety of our clients we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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