Although entrepreneurs and endeavor financiers typically drive the settlement of the term sheet for a venture financing, when the term sheet is performed, the business celebrations (specifically those who have not been through the procedure often times) frequently feel sidelined in the occurring process to close and unpleasant with their absence of presence into and control over the timeline. Accordingly, I believed it would be valuable to offer a top-level introduction of a standard venture funding timeline.
After the signing of the term sheet (” T/S”) by both celebrations, financier counsel will send out request to business to examine its due diligence materials.
T/S signing +1 week, company will compile and provide the asked for diligence product for investor counsel to examine.
T/S finalizing +1 -2 weeks, company counsel will prepare and provide primary and secondary financing files for investor counsel to review.
T/S finalizing + 3-4 weeks, investor counsel will offer comments and questions relating to both the diligence products and funding documents. The celebrations will then look for to fix these issues by week 4 so that they can proceed with finalizing and sealing the deal.
The three main work streams involved are diligence, primary financing documents, and secondary financing documents. These work streams will often consist of the following products:
Diligence materials (company to provide materials and financier counsel to then examine).
Approximately 30 days from signed term sheet to close is generally a finest case situation, assuming no diligence problems or other sticking points in the settlement. The addition of multiple financiers can also make complex the procedure and extend the timeline. Despite that prospective variability based on individual scenarios, I hope the above can be used as a general criteria for companies and financiers to keep their offer on track.
Supplementary financing files (business counsel to draft and investor counsel to then evaluate).
Changed and Restated Certificate of Incorporation.
Stock Purchase Agreement.
Investors Rights Agreement.
Right of First Refusal & & Co-Sale Agreement.
Business formation and organizational files, consisting of the certificate of incorporation, bylaws, resolutions of the business, and prior funding documents.
Business capitalization files, including company stock ledgers, impressive option documentation, and pro forma capitalization.
Current and past work and founder contracts.
Agreements documenting ownership or license of copyright.
Material arrangements, including contracts with incubators/accelerators, financial obligation facilities, key consumer contracts and genuine estate leases.
Any threatened, pending or settled lawsuits.
Other miscellaneous documents.
Main funding files (company counsel to draft and financier counsel to then review).
Disclosure Schedule or Schedule of Exceptions to the Stock Purchase Agreement.
Management Rights Letter.