With your term sheet ink dry and the fundraising end in sight we’ve got just one more lesson to share: it’s not over until there’s cash in the bank. While it sounds obvious now, it’s something that is typically forgotten after the fatigue of negotiation has set in.
To be clear, the worst is behind you, and many founders are struck by the juxtaposition that this final stage has compared to the others. You won’t have more negotiations, and the hard sales push is largely over. Broadly speaking, allocation is both frustrating and largely ignored in most fundraising coverage because it’s kind of boring too. For the uninitiated, this final stage is the time to ensure all loose ends are tied up. T’s are crossed, I’s are dotted and every other excruciating detail is reviewed in triplicate. Every deal will vary a bit, but for the most part that looks like this:
- Due Diligence (DD): an investor’s audit of the business before finalizing the deal
- Investor Allocation: deciding how much each investor will be able to invest in this round
- Legals: the back and forth between lawyers (yours and investors’) to ensure all documents are correct
- Cash Deposit: when investors actually wire you money
This can be taxing on your entire team (not just founders) and communicating with all your investors can feel like herding cats. Worst of all, you’ll need to start dealing with lawyers. Nevertheless, having a signed lead is a huge milestone, and you can safely take a sigh of relief. At this point this is your round to lose. There are a few things that you must do to avoid a falling out but for the most part this is a time to focus on optimizing your company for the future. Here are a few things to consider in your final days of fundraising.