Securing angel investors’ or venture capitalists’ funding is a tough cookie for initial-stage startups. With no business plan and tangible revenue statistics, investors fail to see the potential.
Therefore, before raising funds for your company, analyze if your company is prepared for this? If you believe it is good to go, research. Check out the best venture Capitalists or investors for your firm. Prepare your pitch and attract the right investors.
Sometimes, you find investors quickly. However, it would help if you never halted exploring the best in the town. You must negotiate and finalize the deal the right way.
Negotiating and closing the sales is stressful and time-consuming, and it is essential to consider why you started all that in the first place, and it keeps the momentum going. At the closing funding stage, it is ideal to seek the expertise of industry experts and experienced angel investors.
It is essential to understand negotiation matters the most at this stage. You solely share the responsibility of doing it right, and no one will do it on your behalf. If you want, seek guidance from experts for a smooth negotiation.
The blog states the apt way to conclude and summarizes the funding closing process.
How Can Businesses Negotiate a Beneficial Deal at The Closing Stage?
Closing a business funding deal might be complicated, but you can do certain things. It is all about organizing everything and preparing. Closing a business investing deal is not easy as getting cash in hand and leaving. It does not have to be overwhelming too. Here are some ideal ways to approach the closing stage:
Design and prepare the term Sheet
A term sheet outlines a complete overview of the company’s key investment parameters, the percentage of partners in the company profits, and the exit strategy. The document outlines the terms under which an Angel Investor or venture capitalist will invest.
It determines the collateral and financing terms. It highlights the critical parameters of an agreement. It helps sort out the confusion and differences before signing off and doing due diligence. The parties involved in the transaction must agree on the terms mentioned in the sheet.
It grants business owners an excellent opportunity to highlight prime benefits and potentials to capture the investor’s eye.
Once the investor signs up the term sheet, the business cannot negotiate or seek funds from other venture capitalists for 45 days.
It is ideal to stay committed to the agreement until something serious offends you. It is perfect for your business growth prospects. The investors must sign the sheet before businesses receive the funds.
Focus on priorities
It is the last stage of the startup business funding. Hence, you should ensure to check the critical parameters. Have you missed a specific business parameter? Could it prove a massive fetch for your business? During the closing deal negotiation, identify the factors that can benefit your startup later. What do you wish to achieve from this term sheet? Are the aspects mentioned in the document align with your dreams?
For this, plan out things early. Draft your investment terms. Consider both the firm’s and investor’s interests while doing so. Decide the terms you can run flexibly on and the times you cannot compromise.
Always remember that the Series A terms of the process set the base for all funding rounds. This is why you must make sure and analyze the terms sagaciously before presenting the theme to the investor.
Ask questions and clear the confusion
If this is your first venture and is approaching the investor for the first time, ask questions. It helps the investor know your product or idea better and clears the clutter.
Try not to lose hold of the engaging conversation. Keep the investor interested to know more about your brand. In case you miss the point, do not hesitate to ask. Investors understand the firm is new and might have questions. So, there is nothing wrong with ensuring clarity over the terms.
Consider why you are here in the first place. Do you wish to leave the million dollars on the table and leave? You are here for a purpose. Ask questions.
If you have any questions like:
What if I have a few business loans in Ireland? Would the agreement cancel in that case?
Negotiating is not your prerogative but knowing your company is. Analyze the pros and cons, strengths and weaknesses, and capitalize on prominent prospects.
Document the discussions
An ideal way to keep lead and tab over funding ongoings is by documenting the decisions made on the table. Document the conversation and discussion held. If the investor is busy or feasibly unavailable for a quick call, send a mail.
It is, however, ideal to discuss everything in-person to clear the air and ensure updates. If you document everything in a well-formatted and professional email, you might receive a response quickly. Explaining and demonstrating everything in writing reduces the possibility of confusion and disagreements. It optimizes the fundraising process.
Articulate investor’s timeline and expectations
Clearing every doubt is critical to negotiating the deal in the last funding stage. Asking questions reveals your interest and eagerness to grab the deal. Thus, never leave the investor thinking. One startup blunder is negotiating the process based on equity and capital. It is a significant turn-off for the investor.
Instead, talk about the value the investor could provide on the table. Focus on their participation in the company’s decisions and investments. List out the ways how you are going to utilize the funds received.
Provide a clear overview of the investor’s role in the business growth and grooming.
Do you want me to help you with mentorship?
Do you wish to leverage their networks for brand awareness?
Do you see them as experts in the field and wish to leverage their expertise in the firm’s crucial decisions?
Specify this to your investor.
Cultivating cooperation at both ends is profitable in terms of business growth. Thus, it is the most crucial aspect for both an investor and a business.
Never break the agreement you made in writing with an investor. Re-arranging the deal may not catch up with the investor’s vibe later. It may impact the business’s reputation. Thus, stand by the agreement you made.