Phase II - Fundraising
Phase II - Fundraising is where you start investor meetings with the goal of signing a term sheet. It’s comprised of 3 separate parts:
- Soon But Not Yet - to qualify investors
- The Switch - when you have enough momentum
- Signing ASAP - maximize competition to get best possible term sheet
In the second phase, fundraising, you start to actually meet with investors with the ultimate goal of signing a term sheet, which is a 1-2 page document that outlines the key terms of the financing round.
Fundraising itself can be further broken down into the following 3 parts:
Soon But Not Yet - where you kick off parallel conversations with the goal of qualifying investors, which means finding out whether they are interested in leading and/or participating in your financing round.
The Switch - where you either have a term sheet or are very certain you are about to get one so you change gears from discovery to making a deal.
Signing ASAP - where you optimize the key terms of the deal, finalize the term sheet, and sign it.
You should aim to spend 3 months on this effort. There is nothing worse than a fundraising process that drags out. The investor community is small and well-networked - word will get out that you are getting turned down and fundraising will get much harder.
The key is to develop momentum, which is mostly about parallelizing investor conversations. You want to run a tight process, in the sense that you “appear” on the fundraising stage for a limited and brief amount of time, talk to key VCs, make a deal, and then go back to building your business.