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Blog Home > 15 Step Process for Raising Venture Capital: Part 5

July 11, 2007

15 Step Process for Raising Venture Capital: Part 5

Here is the last installment of The 15 Steps to Raising Venture Capital. Steps 12-15 are The Term Sheet Signing, The Full Due Diligence, The Final Investment Documents, and The Deal Signing...

  1. The Term Sheet Signing: Agree to the general terms of the deal and either digitally sign the term sheet or sign in person.
  2. The Full Due Diligence: Once you sign the term sheet, a more extensive due diligence list will be provided to you. This list may include items such as:
    1. Detailed sales pipeline
    2. Revenue by customer type
    3. Detailed operational plan and budget
    4. Full business plan
    5. Hiring plan
    6. Detailed revenue assumptions
    7. Audited financial statements
    8. Bank reconciliation detail
    9. Product Pricing list
    10. Detailed product roadmap
    11. Customer, Employee, Insurance, and Lease contracts
    12. Relevant whitepapers and analyst coverage
    13. Details on IT infrastructure
    14. Current partner list
    15. Lead generation processes
    16. Customer satisfaction survey
    17. Customer reference list
    18. Details on intellectual property
    19. Current capitalization chart with options detail
    20. Organizational chart
    21. Salary and bonus structure for company
    22. Employee turnover
    23. Management background checks
    24. Competitive analysis
    25. Expected acquirers
    26. Past board meeting minutes
  3. The Final Investment Documents: Once this due diligence is complete, if all goes well, you will receive the final investment documents from the investment firm’s lawyers. Have your attorney review it closely and negotiate any needed changes. Pay especially close attention to any representations and warranties you are making as an officer of the company and personally. The final investment documents generally include a:
    1. Share Purchase Agreement
    2. Investor Rights Agreement
    3. Right of First Refusal and Co-Sale Agreement
    4. Voting Agreement
  4. The Deal Signing: Provide your company bank account information, close the deal, watch the funds go into your account, breathe a sigh of relief, send out the press release, and welcome your new investor(s) and board member(s) to the team with a celebration open house, exchange of company swag, and thank you card. Then get going on growing revenue.

As you can see, the process can be arduous and long, especially if you are dealing with multiple firms and trying to parallel process to create a competitive round. At the end of the day, even if a firm is not interested, try to build a relationship for the future. 

Posted by ryanallis at July 11, 2007 08:42 PM

About this Blog: Follow the journey of entrepreneur Ryan Allis as he builds his company iContact into the worldwide leader in on-demand software for online communications, publishes his book Zero to One Million, travels the country as a speaker on entrepreneurship, explores the worlds of public policy, technology, marketing, management, leadership, venture capital, and organizational behavior, and lives a passionate life as a North Carolina entrepreneur and CEO.

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