Venture Capital – What Takes place Immediately after The Due Diligence Method
In the event the venture capitalists are interested in your firm immediately after finishing their due diligence, they’ll offer you a binding term sheet. It will reflect the draft term sheet that has currently been agreed to but this 1 is going to be a legal contractual agreement. Then the genuine negotiations commence.
There are diverse varieties of financing to think about: debt, equity, and mezzanine.
Debt financing could be the most objective and is for that reason the easiest to negotiate. In case you have the assets to support the debt and also the income to assistance the interest payments, the negotiation period is going to be quite short.
Equity financing negotiating is much more complex and revolves about agreeing on valuation and percentage ownership. Discussions typically requires a number of days.
Mezzanine financing includes a mix of equity, debt, convertible debentures and preferred shares. Negotiating the technical aspects of each and every to ensure that an agreement may be reached amongst the investor and your company can be time consuming.
Another dictating aspect may be the quantity and variety of financing delivers that you simply get. It is the intermediary’s role to assist you bring more than a single supply to the table and help you in evaluating and negotiating which one particular is very best suited for your company’s demands based on their prior knowledge.
Venture capital term sheets are time limited. You will need to swiftly make up your mind if you would like to accept or reject the supply. The short time period is in spot to prevent you from employing one particular term sheet to solicit new provides from other venture capitalists.
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