The Term Sheet Isn't the End
Receiving a term sheet is a major milestone, but roughly 10–15% of term sheets never make it to close. Understanding the post-term-sheet process helps you avoid surprises and close your round faster.
Step 1: Review and Negotiate (3–5 Days)
Have your lawyer review the term sheet immediately. Key terms to scrutinize: valuation, liquidation preferences, board composition, anti-dilution provisions, and protective provisions. Most terms are negotiable — especially if you have multiple term sheets.
Step 2: Due Diligence (2–4 Weeks)
Once you sign the term sheet, the investor's due diligence begins in earnest. They'll want access to:
- Financial statements and bank records
- Customer contracts and pipeline
- Employment agreements and IP assignments
- Cap table and previous investment documents
- Technical architecture and product roadmap
Having a well-organized data room ready before you even start fundraising can save weeks here.
Step 3: Legal Documentation (2–3 Weeks)
Your lawyers and the investor's lawyers will draft the definitive agreements: Stock Purchase Agreement, Investors' Rights Agreement, Voting Agreement, and Right of First Refusal. Expect multiple rounds of redlines.
Step 4: Final Approvals and Signing
The lead investor's partnership must formally approve the deal. If there are co-investors, their documents need to be coordinated as well. This administrative step can add unexpected delays.
Step 5: Wire and Close
Once all documents are signed, the wire transfer is initiated. Money typically arrives within 2–5 business days. Congratulations — you've officially closed your round.
Pro Tips for a Smooth Close
Maintain momentum by being responsive to every diligence request within 24 hours. Keep your existing investors informed. And never, ever celebrate publicly until the money is in the bank.