The length of the fundraising process varies, no necessarily based on the amount raised, but based on the founders’ and company’s experience. Founders that are very well connected will be able to raise money faster, while startups may find that as their business model becomes increasingly safer and the validation has taken place, funding rounds become faster, assuming that the company meets its milestones. That is why at seed stage, without validation, even if the funds sought are low, it may take longer to raise funds, sometimes even well over a year from the first investor contact, to get the cash in the bank.
You should take this into account by leaving sufficient time and runway to raise funds. In fact, even with some interested investors, it takes some time to get the deal done. Here is an overview of all the steps in the fundraising process that you could encounter:
Before reaching negotiations, it is worth learning more about term sheets and being prepared on what you could expect, as well as knowing what concessions you are willing to give away.
The term sheet is a non-binding offer that is signed before a potential due diligence, then followed by a shareholder agreement, in case of an equity transaction. Be aware of the fact that most term sheets include these clauses, but ensure that they do not put you at a great disadvantage. Typically VC term sheets will be stricter than the ones presented by some business angels. The most well-known clauses are listed here: