The Next Steps After The Meeting
The Next Steps After The Meeting
If the venture capitalists are interested, they will very quickly come up with a draft term sheet for you which gives an overview of the conditions under which they would make an investment in your company. (see next page for a sample term sheet)
They provide a draft term sheet so that they can get an understanding of what the deal could look like and ensure that there is not a disconnect between you and them on valuation, methodology or type of financing.
The draft term sheet is not a commitment on the part of the venture capitalist. It is not a legally binding agreement. It is a proposed framework under which the venture capitalist is prepared to do business. The most important element of the draft term sheet is the valuation. If you are too far apart on valuation the deal will not go any further.
The due diligence process is not a 24 or 48 hour process, it is quite time consuming. In order to save time the draft term sheet is put forward to ensure that a negotiable transaction can be reached before investing further effort.
There are also considerable up front fees that the entrepreneur will have to pay. Among these are the venture capitalist's legal fees. Some venture capital firms will also require a $20,000 to $30,000 non-refundable payment up front before going forward.
The time period given to accept or reject the draft term sheet is not very long. You will have to commit to it or drop it fairly quickly.
If the venture capitalists are interested, they will very quickly come up with a draft term sheet for you which gives an overview of the conditions under which they would make an investment in your company. (see next page for a sample term sheet)
They provide a draft term sheet so that they can get an understanding of what the deal could look like and ensure that there is not a disconnect between you and them on valuation, methodology or type of financing.
The draft term sheet is not a commitment on the part of the venture capitalist. It is not a legally binding agreement. It is a proposed framework under which the venture capitalist is prepared to do business. The most important element of the draft term sheet is the valuation. If you are too far apart on valuation the deal will not go any further.
The due diligence process is not a 24 or 48 hour process, it is quite time consuming. In order to save time the draft term sheet is put forward to ensure that a negotiable transaction can be reached before investing further effort.
There are also considerable up front fees that the entrepreneur will have to pay. Among these are the venture capitalist's legal fees. Some venture capital firms will also require a $20,000 to $30,000 non-refundable payment up front before going forward.
The time period given to accept or reject the draft term sheet is not very long. You will have to commit to it or drop it fairly quickly.
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