Closing Deals

The Closing Deals workflow guides you through the final stages of fundraising: understanding term sheets, negotiating terms, completing due diligence, and getting money in the bank.

Overview#

Outcomes#

A successful closing process delivers:

• Understanding of all term sheet components
• Favorable terms negotiated
• Clean due diligence completion
• Money in the bank
• Strong investor relationship foundation

Phase 1: Understanding Term Sheets#

Term Sheet Anatomy#

A typical term sheet includes these sections:

Key Economic Terms#

Valuation:

• Pre-money valuation - Company value before investment
• Post-money valuation - Pre-money + amount raised
• Dilution - Your ownership decrease

Option Pool:

• Typically 10-20% of post-money
• Usually comes from pre-money (increases effective dilution)
• Negotiate size and timing

Liquidation Preference:

• 1x non-participating (standard, founder-friendly)
• 1x participating (investor-friendly, double-dip)
• >1x (avoid if possible)

Key Control Terms#

Board Composition:

Protective Provisions:

Investors typically get veto rights over:

• Raising more money
• Selling the company
• Changing board size
• Taking on significant debt
• Changing the charter

Pro-Rata Rights:

• Right to maintain ownership in future rounds
• Standard for institutional investors
• Important to understand who has them

Term Sheet Checklist#

• Understand pre-money valuation
• Calculate post-money ownership
• Check option pool size and timing
• Review liquidation preference
• Understand board composition
• Review protective provisions
• Check vesting terms
• Understand information rights
• Review exclusivity period

Phase 2: Negotiation Strategy#

What's Negotiable#

Negotiation Priorities#

Rank your priorities before negotiating:

Negotiation Scripts#

Asking for Higher Valuation:

"We've been seeing strong interest from other investors at [higher valuation]. Given our traction - [specific metric] - we believe [your target] better reflects our current position. We're excited to work with you and want to find something that works for both sides."

Pushing Back on Option Pool:

"A 20% option pool seems larger than we'd need for the next 18 months. Based on our hiring plan, 15% should cover our needs until Series A. Can we structure this as 15% now with the understanding we may expand before the next round?"

Negotiating Board Seats:

"We'd prefer to maintain a 3-person board for now to keep things efficient. Would you be comfortable with one investor observer seat instead of a full board seat at this stage?"

Creating Competitive Dynamics#

With multiple term sheets:

• Don't explicitly "auction" - it burns bridges
• Share that you have other interest
• Use competition to improve terms, not just valuation
• Move quickly to avoid losing investors

Timeline management:

"We have a few conversations in late stages and need to make a decision by [date]. We're very excited about working with you and want to make sure we can align on timeline."

What NOT to Negotiate#

• Don't nickel-and-dime on small things
• Don't make it adversarial
• Don't bluff without backup options
• Don't accept terms you'll regret later

Phase 3: Due Diligence#

What Investors Will Request#

Corporate Documents:

• Certificate of Incorporation
• Bylaws
• Board minutes
• Stock purchase agreements
• Cap table

Financial Information:

• Historical financials
• Bank statements
• Revenue breakdown
• Accounts receivable/payable

Legal:

• Material contracts
• Customer agreements
• Employee agreements
• IP assignments
• Any litigation

Product/Technical:

• Technical architecture overview
• Security practices
• Third-party dependencies

Due Diligence Checklist#

Reference Checks#

Investors will want to speak with:

Customer references:

• 2-3 happy customers
• Prepare them with heads-up
• Brief them on key talking points

Founder references:

• Previous colleagues
• Past investors
• Industry contacts

Prepare your references:

"Hi [Name], I'm in late stages with [Investor] and they may reach out for a reference. A few things that would be helpful to emphasize: [key points]. Thanks for your support!"

Common Due Diligence Issues#

Phase 4: Closing Process#

Timeline to Close#

Legal Documents#

Closing Checklist#

Before closing:

• All documents signed by all parties
• Board approval obtained
• All conditions satisfied
• Wire instructions verified
• D&O insurance in place (if required)

Closing mechanics:

• Signature pages collected
• Stock certificates issued
• Cap table updated
• Wire received and confirmed
• Closing binder compiled

After the Close#

Immediate actions:

• Announce to team
• Update investors
• Press release (if desired)
• Update your LinkedIn/website
• Begin board meeting cadence
• Set up investor update rhythm

First 30 days:

• First board meeting scheduled
• Key hires initiated
• 18-month plan confirmed
• Investor intros facilitated

Recommended Agents#

Deliverables#

Best Practices#

1. Hire a good lawyer - Experienced startup counsel is worth it
2. Move quickly - Momentum matters; delays kill deals
3. Communicate constantly - Keep investors updated
4. Prepare early - Have your data room ready before term sheet
5. Stay professional - Even in tough negotiations
6. Get multiple term sheets - Competition helps everyone

Common Pitfalls#

• No lawyer review - Always have counsel review terms
• Over-negotiating - Don't burn the relationship
• Slow responses - Delays signal disorganization
• Surprise disclosures - Bad news should come early
• Verbal agreements - Get everything in writing
• Celebrating early - It's not done until wire hits

Negotiation Red Lines#

Know your walk-away points:

After the Close#

Set up for success:

Related Workflows#

• Fundraising Readiness - Prepare to raise
• Materials Preparation - Build your materials
• Investor Targeting - Find investors
• Pitching Process - Win the meeting