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...
The Term Sheet Signing: Agree to the general terms of the deal and either digitally sign the term sheet or sign in person.
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:
Detailed sales pipeline
Revenue by customer type
Detailed operational plan and budget
Full business plan
Detailed revenue assumptions
Audited financial statements
Bank reconciliation detail
Product Pricing list
Detailed product roadmap
Customer, Employee, Insurance, and Lease contracts
Relevant whitepapers and analyst coverage
Details on IT infrastructure
Current partner list
Lead generation processes
Customer satisfaction survey
Customer reference list
Details on intellectual property
Current capitalization chart with options detail
Salary and bonus structure for company
Management background checks
Past board meeting minutes
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:
Share Purchase Agreement
Investor Rights Agreement
Right of First Refusal and Co-Sale Agreement
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.