Stages of the Deal Process

Stages of the Deal Process

January 12, 2021 by investor

A startup investment goes through a series of stages.

It starts with the pitch presentation in which the startup introduces the deal to the investors.

Then there’s the first follow-up meeting in which the investors dig into the deal to learn the details.

Investors want to think about it and also want to see the startup continue to make progress.

Then comes the Due Diligence phase in which the investors perform a more rigid review of the startup’s documents, team, and market.

If the term sheet has been established by other investors, then the investors review those documents. If not, the investor must negotiate the terms including valuation.

Investors then check with their network to see who else may want to invest or put it out to other investors for syndication.

Finally, there’s the closing of the round with the signing of documents.

Not every startup makes it all the way through the process.

Here are some key challenges:

– When the investors come together to dig into the deal, it must have enough traction and value propositions to maintain the investors’ interest before the investors commit significant time to it. 

– Some deals stall because the diligence process didn’t continue because the investors were distracted.

– Some deals stall because the startup and the investors cannot agree on valuation.

– Finally, some deals stall out or come up with a lower investment amount because investors fell out at the closing stage. 

It’s important to keep the momentum going throughout the process both on the investor side and the startup side.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.


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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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