How to Raise Money from Angel Investors and Venture Capitalists – Chapter 9

Quick Recap of the Steps
by Marshall Brain

Let’s review the steps we’ve discussed in the previous chapters. The steps that a company typically takes to raise money from angel investors or venture capitalists look like this:

  1. You find a point of entry for the angel group or VC firm. You make sure that the group/firm is interested in investing with a company like yours and your company’s stage. You meet someone who can provide you with an introduction so you are not submitting your application as an unknown company.
  2. You apply, providing things like a business plan, a description of your management team, and a Power Point deck.
  3. A screening committee looks at your application. Since you were referred in, this is usually a formality. Typically the screening committee is makiing sure that your company is not a Lifestyle company, that your company matches the profile sought by the firm, that you have an exit plan, that the market is large enough, that you have a qualified management team, etc.
  4. The executive committee or firm schedules a first face to face meeting.
  5. Typically at this first meeting you will do a presentation using your Power Point deck.
  6. An angel group will have an open discussion after your presentation and vote yay or nay on moving forward.
  7. Due Diligence part 1 – the 100 to 200 point questionnaire.
  8. Due Diligence part 2 with interviews of customers, references, employees, tech, etc.
  9. Having examined the results of Due Diligence there is a second vote.
  10. The exec committee produces a term sheet. It will state a valuation for the company, the amount of money the firm plans to invest and any conditions – board seat, observer rights, monitoring, etc.
  11. If the term sheet is agreed to by both parties, legal documents are drawn up.
  12. Once the legal documents are signed, money is wired into your company’s bank account. The relationship with the investor begins in earnest.
  13. There may be more funding, series B, C, etc.
  14. You move your company toward your liquidity event (acquisition or public offering) which provides your exit for investors.

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