How to Close a Funding Round: From Term Sheet to Wire
Getting a term sheet is not the finish line. The final steps from signed term sheet to money in the bank take 4-8 weeks and require more from founders than most expect.
Most fundraising guides end at the term sheet. The term sheet feels like the finish line - the investor said yes, the valuation is agreed, the deal is done. But experienced founders know that the term sheet is the beginning of the hardest part.
From signed term sheet to money in the bank typically takes 4 to 8 weeks. During that time, lawyers are drafting and negotiating final documents, investors are conducting due diligence, references are being checked, and any number of things can slow or kill a deal that seemed certain. Understanding the process - and what you can do to accelerate it - is the difference between closing on time and closing six weeks late.
What happens after the term sheet
A signed term sheet is a non-binding document. It commits neither party to complete the deal. What it does is establish the key terms that will be documented in the binding legal agreements: the stock purchase agreement, investor rights agreement, voting agreement, and right of first refusal and co-sale agreement.
Your lawyer and the investor's lawyer will negotiate these documents. This is where the abstract terms in the term sheet become specific legal language. A term like 'standard protective provisions' in the term sheet can become a list of 15 or 30 specific actions that require investor consent in the final documents. Read every clause. Do not leave it entirely to your lawyer.
Choose a startup-specialist lawyer before you need one
The worst time to find a lawyer is when you have a term sheet in hand. A lawyer who does not regularly work on venture deals will slow the process and miss market-standard terms. Use a firm that has closed hundreds of seed and Series A deals - Gunderson, Cooley, Fenwick, Wilson Sonsini, or equivalent. Ask your lead investor who they recommend.
The due diligence process: what investors verify
Even after signing a term sheet, investors conduct due diligence. The depth varies by stage: a seed investor may do a light pass in a week, while a Series A investor may spend four weeks on a formal process with multiple workstreams.
Common due diligence items at seed: incorporation documents and cap table review, IP assignment verification (every founder and early contractor must have assigned IP to the company), reference checks on founders (typically 5-10 calls with former colleagues and customers), background checks, review of any material contracts, and a product or technical review.
At Series A, add to this: full financial audit or review, customer reference calls, legal review of all material agreements, and sometimes a market study or competitive analysis. Be responsive during this period. Every day a due diligence request sits unanswered is a day the process stalls.
Managing multiple investors: the allocation problem
If you have interest from more than one investor - which you should aim for before accepting a term sheet - you will need to manage allocation. The lead investor typically sets the terms and takes the largest check. Other investors fill the remaining allocation.
Be honest with all investors about where they stand. Telling three investors they are all in 'the lead' when you have already signed a term sheet with someone else is a fast way to burn relationships permanently. The venture world is small. Investors talk to each other.
For follow-on investors in a round: get their commitment in writing as quickly as possible after the lead is signed. Side letters and informal commitments have a way of evaporating between term sheet and close, especially if the process runs long or market conditions shift.
How Stripe closed their Series A in 2012
Series A raised
$18M
Lead investor
Sequoia Capital
Time from first meeting to close
6 weeks
Co-investors
Andreessen Horowitz, SV Angel
Stripe's Series A in 2012 involved three of the most competitive firms in venture capital as co-investors - a configuration that could have created a complex negotiation. The Collison brothers managed the process by moving quickly and keeping all parties informed about the timeline.
Patrick Collison later described their approach as treating the fundraise like a product launch: prepare everything before you start, move fast once you do, and do not let perfect be the enemy of done on any individual term. The financial documents were ready before the first meeting. The cap table was clean. The data room was complete.
The result was a process that went from first Sequoia meeting to final close in roughly six weeks - fast for a raise of that size. The preparation that allowed that speed had been done in the months before they started talking to investors.
The final steps: conditions to close
Most term sheets include conditions to close - things that must be true before the investor will fund. Common conditions: completion of satisfactory due diligence, no material adverse changes in the business, board approval, and execution of all closing documents.
Your job in the final two weeks before close is to clear every condition methodically. Track outstanding items daily. Know which items are blocking close and which are parallel workstreams. The investor's lawyer and your lawyer should be talking every day or two in the final stretch.
On closing day, documents are signed and the investor wires funds. In a seed round with multiple investors, not all wires arrive simultaneously - some investors may fund a day or two after signing. Have a clear agreement on the order of operations: usually documents are signed before any funds move, and the round is not 'closed' until the lead investor has funded.
The day the money hits your account is when the work begins. Send a brief note to every investor in the round with a summary of what you plan to do with the capital and a timeline for your next update. Starting the investor relationship well sets the tone for everything that follows.