How a Fundraise Actually Runs, From First Meeting to Wire
A round runs in phases: preparation, a compressed block of first meetings, partner or committee review, a term sheet, confirmatory diligence, and closing. Leverage comes from having several conversations mature at once, and it peaks at the term sheet. After signing, the work shifts from persuasion to documentation and closing conditions.
Phase one: preparation, and the thing to do before any meeting
Preparation is not the deck. It is the state of your company as a legal and financial object.
Before first meetings, the following should exist and be correct: your formation documents, a cap table that matches the signed paperwork, IP assignments from every founder, employee, and contractor who has touched the product, signed agreements for anyone with equity, and copies of any convertible instruments already issued.
The reason to do this first is timing. These items get requested during diligence, which happens after you have negotiated terms, when delay is most expensive. Producing them in a day signals a company that is run properly. Producing them over three weeks invites a broader look.
The most common defects are boring and fixable in advance: equity promised verbally and never documented, a contractor who wrote significant code without an assignment, missing board consents for past issuances, and a cap table spreadsheet that no longer matches the signed documents.
Phase two: first meetings, run in parallel
The first meeting is a screening conversation. Nobody funds you in it. Its only purpose is to earn a second one where more of the firm participates.
Run these in a compressed window. This is the single highest leverage process decision available to a founder, because a round closes on relative urgency: when several investors are converging at the same time, terms improve and decisions accelerate. When conversations are spread across months, each investor knows they have time and behaves accordingly.
Start with a few meetings you can afford to lose. Your presentation improves substantially through repetition, and the questions you cannot answer in the first three conversations are the ones to fix before meeting your preferred lead.
Track every commitment you make in a meeting and deliver on it faster than expected. The follow-through gap is a real signal to investors and it is where a surprising number of promising conversations quietly end.
What each participant is optimizing for
A partner is deciding whether to spend political capital advocating internally. An associate is deciding whether this is worth a partner's time. A committee is deciding whether the story survives without you in the room. Understanding which one you are talking to tells you what your material has to accomplish in that meeting.
Phase three: the term sheet, and what it actually does
A term sheet sets out the economics and control provisions of a proposed investment. Most of it is expressly non-binding, which surprises founders who treat it as the finish line.
What is typically binding is narrow and consequential: confidentiality, an exclusivity or no-shop period during which you agree to stop talking to other investors, and sometimes expense arrangements. That exclusivity clause is the reason the term sheet is the moment your leverage peaks and then declines. Once signed, your alternatives are contractually paused.
So the negotiation you care about happens before signing, not after. Beyond the valuation, the terms that matter over time are liquidation preference, the option pool and whether it sits pre or post money, board composition, protective provisions, pro rata rights, and anti-dilution. Several of these affect control rather than money, and control provisions are much harder to unwind later than a price.
This is general information about how term sheets are structured, not legal advice. What a specific clause does depends on the full document set, and a term sheet should be reviewed by counsel before signature precisely because the binding parts are easy to skim past.
Phase four: diligence and closing
After signature the work changes character. Persuasion is finished; what remains is verification and documentation.
Confirmatory diligence covers corporate records, IP ownership, material contracts, employment matters, and the cap table. This is where the preparation from phase one pays or costs. Investors expect small problems and are generally willing to see them fixed as closing conditions. What damages a deal is discovering that something is materially different from what was represented.
Definitive documents follow, and they are considerably longer than the term sheet. They implement what was agreed and also settle a large number of details that the term sheet did not address, which is why the term sheet's silence on a point is not the same as the point being resolved in your favor.
Closing conditions typically include board and stockholder approvals, cleanup of any defects found, and delivery of signed documents. Money moves after those conditions are met, which is usually weeks after the term sheet was signed. Plan runway against the wire date rather than the signature date, because that gap has ended companies that thought they were funded.
Reading a pass correctly
Most passes are about fit: stage, sector, portfolio conflict, fund timing, or an existing bet on a competitor. Very few are a verdict on your business. The useful response is a single question about what would need to be true to be interesting later, then a decision about whether that milestone is worth pursuing for its own reasons rather than for this investor.
Frequently asked questions
- How long does a fundraise take?
- Longer than the meetings suggest, because the post-term-sheet phase is measured in weeks. Plan your runway to the wire date rather than the signature date. Confirmatory diligence, definitive documents, approvals, and closing conditions all sit between a signed term sheet and money actually arriving in the account.
- Is a term sheet binding?
- Mostly not on economics, but usually binding on a few provisions such as confidentiality, exclusivity or no-shop, and sometimes expenses. Signing pauses your alternatives contractually, which is why leverage peaks just before signature. Have counsel review it before signing, since the binding provisions are the easiest to skim past.
- Why should fundraising meetings happen in parallel?
- Because rounds close on relative urgency. When several conversations mature at the same time, terms improve and decisions accelerate. Spread over months, each investor knows they have time and behaves accordingly, and you also signal how long you have been raising, which is read as a negative.
- What should be ready before diligence starts?
- Formation documents, a cap table that matches signed paperwork, IP assignments from everyone who touched the product including contractors, executed equity agreements, and copies of any convertible instruments. Producing these in a day signals a well run company. Assembling them over weeks invites a broader look at everything else.