FEATURE > Venture Capital

In Brief: VC Investment Process
 
While no two investment processes are identical, there are some common steps through which most deals move:
 
Step 1 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.
 
Step 2 VC meets the entrepreneur or team. Discusses the business opportunity in detail - sees if the team really understands the key dimensions to the business.
    At this time the team may have to give a formal presentation.
 
Step 3 VC performs reference checks on the team and due diligence on the business opportunity, trying to understand the team, company, market and industry better.
 
Step 4 Management team meets the all the partners at the VC firm. (This can happen earlier or later.)
 
Step 5 Terms are negotiated - valuation and other financial terms, governance and other control issues, etc. Term Sheet is signed.
 
Step 6 Legal, financial and technical due diligence performed.
 
Step 7 If all works out, legal documents, including Shareholder Agreements, are drafted.
 
Step 8 Legal documents are signed, and funds transferred from VC fund to company.
 
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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