Many entrepreneurs looking for funding in order to develop a service or a product or start scaling up their activities after finding the product-market fit. First time entrepreneurs and those who haven’t raised fund yet often struggle to figure out how does the venture capital investment process look like.

venture-capital1

Now here is a short cheat sheet to help:

  1. Startup decides  that cash is required for expansion; development; buying out existing shareholders or whatever;
  2. Preparation of a business plan and funding proposal;
  3. Initial approach to an investor;
  4. Investors’ preliminary (usually desk-based) consideration followed by live meetings and visits;
  5. Preliminary (indicative) offer letter;
  6. Discussion of terms internally by applicant;
  7. Acceptance of indicative offer;
  8. Due diligence (business model, technological, legal)
  9. Results of due diligence studied – indicative offer confirmed or modified;
  10. Investment committee proposal (VC) – indicative terms approved or modified or rejected;
  11. Full offer letter issued by VC;
  12. Formal acceptance of terms  by investee;
  13. Venture capital funding
  14. Legal stages – which are meetings first, between the VC and his lawyer to draft the legal agreement; and then, meetings between the company and its lawyers to consider their reply and finally a series of meetings between both parties to agree on the terms
  15. Completion meeting – held at the offices of the VC’s lawyers;
  16. New investor joins company (and probably the board);

Good luck with the fundraising and let me know if you have remarks, comments on how to improve the sample process

Source: based on Venture Capital Funding: A Practical Guide to Raising Finance Stephen Bloomfield, 2005

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