5min
Module 1: The Funding Landscape
Module 2: The Pre-Seed and Seed Stage
Module 3: The Series A Stage
Module 4: Later Stage Funding (Series B and Beyond)
Module 5: The Fundraising Process
15/16 Lessons
Content
After an investor expresses serious interest, the fundraising process enters a new phase. This is the transition from "dating" to the final steps before a formal partnership.
1. The Due Diligence (DD) Process
Due diligence is a comprehensive investigation into all aspects of your company. The investor wants to verify that all the claims you've made in your pitch deck and meetings are true. The better you have prepared, the faster this process will go.
What investors look for in due diligence:
Legal: They'll review your company's incorporation documents, intellectual property filings, and all contracts with employees and customers.
Financial: They'll scrutinize your financial statements, projections, and bank records.
Product: They'll review your code, conduct product demos, and talk to your customers to verify product-market fit.
Team: They'll perform background checks on the founders and key employees.
*Having an organized data room with all of this information ready is a sign of professionalism that will greatly speed up this process.
2. The Term Sheet
A term sheet is a non-binding document that outlines the key terms and conditions of an investment. It is the framework for the final, binding legal agreement. While it is not legally binding, it is crucial to understand every component before you sign it.
Key components of a term sheet include:
Valuation: This is how much your company is valued. This is a critical component that determines the percentage of ownership the investor will receive.
Investment Amount: The total amount of money the investor will contribute to your company.
Liquidation Preference: A clause that determines how proceeds are distributed in the event of a sale or liquidation. This often gives investors the right to get their money back before founders and employees.
Board Seats: This outlines how many seats on your company's board of directors the investor will receive.
*Always consult with a lawyer before you sign a term sheet. A good lawyer will help you negotiate the terms and ensure the deal is fair for you and your company.