| While no two investment processes are identical, there are some common steps through which most deals move: |
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| Step 1 |
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Introduction - deals have a much higher chance of getting closed if the company is referred to the VCs by a trusted source. At this stage, an executive summary and/or business plan might go to the VC. |
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| Step 2 |
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VC meets the entrepreneur or team. Discusses the business opportunity in detail - sees if the team really understands the key dimensions to the business. |
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At this time the team may have to give a formal presentation. |
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| Step 3 |
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VC performs reference checks on the team and due diligence on the business opportunity, trying to understand the team, company, market and industry better. |
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| Step 4 |
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Management team meets the all the partners at the VC firm. (This can happen earlier or later.) |
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| Step 5 |
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Terms are negotiated - valuation and other financial terms, governance and other control issues, etc. Term Sheet is signed. |
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| Step 6 |
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Legal, financial and technical due diligence performed. |
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| Step 7 |
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If all works out, legal documents, including Shareholder Agreements, are drafted. |
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| Step 8 |
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Legal documents are signed, and funds transferred from VC fund to company. |
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Timing:
The entire process may take as short as 3 months. But often the initial contact happens well before any deal is concluded, as the VC might be waiting to see how things develop at the company.
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