Vibe Coding is creating startups that aren’t ready for investment
Vibe coding is moving from experimentation to business creation at extraordinary speed. But eAccounts warns that founders are building investable-looking products much faster than they are building investor-ready companies.
Tools such as Cursor, Lovable, Replit, and Claude have made it possible for founders, technical and non-technical alike, to go from business idea to working product in days rather than months, in a trend now widely known as vibe coding. But eAccounts says the speed at which founders can now move from idea to product is creating a mismatch. Products may be ready to demonstrate to investors within weeks while the company behind them can still have unresolved questions around ownership, founder equity, financial records, tax reliefs and investment schemes.
The product is rarely what raises the red flag. The problem sits with the company itself. How shares were issued, whether founder vesting was ever put in place, whether the IP behind the product legally belongs to the company rather than to an individual or a freelancer, and whether there are records to back any of it up. A cap table drawn up informally, or one that does not match Companies House filings, can unravel investor confidence however good the product is.
eAccounts founder Kris Corbisiero says the most common and costly mistake the firm sees is incorporating too late. “Any IP built before a company is formally incorporated belongs to the founder personally, not the business. You can fix it with a proper assignment into the company, but it needs doing early, and it needs doing right, because investors will find it in due diligence. There is also a tax trap waiting for anyone who simply swaps the IP for shares, as SEIS and EIS shares have to be paid up in full in cash.
“Founder shares issued without a vesting schedule create a similar risk. If a co-founder leaves early, they can walk away with a large slice of equity for very little contribution, which leaves a cap table investors treat as toxic.”
Financial records are another weak spot. Founders who run business and personal money through the same account usually have nothing coherent to show an investor, and rebuilding months or years of transactions after the event rarely inspires confidence.
Ownership of the code itself is often just as murky. Copyright in work created by an employee belongs to the company automatically. Copyright in work created by a freelancer or a contractor does not, unless somebody put a written assignment in place at the time. Plenty of founders who used contractors to build an MVP later find that legal ownership of their own product sits with someone else.
The deadline founders miss most often is the one for R&D tax relief, and it cannot be recovered. A first-time claimant has to notify HMRC within six months of the end of the accounting period. Miss it and the claim is gone, however real the R&D was.
“A founder who spends year one building and only speaks to an accountant when they start fundraising has usually already lost that first claim,” says Corbisiero. “There is also a twist people do not expect. R&D relief is there for solving genuinely difficult technical problems, not for putting a product together quickly with tools anyone can buy. The faster you build with AI, the harder that claim tends to be to justify.”
Getting the company right at incorporation, with founder shares, vesting, clean records and eligibility for schemes such as SEIS, EIS and R&D relief, costs far less than putting it right with investors already at the table. A missed R&D notification, no advance assurance, or a messy cap table found halfway through negotiations can delay a round, shrink it, or end it.
Corbisiero adds, “AI has made it possible to go from a spark of an idea to a working product in a couple of weeks, which is a huge change for this generation of entrepreneurs and leaders. But the speed of building has created a new problem. Founders are turning up to fundraising conversations with a product that works and a company structure that does not.”
