Chapter 11. Closing the Deal

We’ve discussed what it takes to line up investor meetings, and how to negotiate a term sheet—the document you hope to receive coming out of your conversations with prospective investors.

In this chapter we’ll cover everything that happens between that initial pitch meeting and the deal being closed. The deal is closed when the paperwork is signed and the money is in the bank.

Securing a Lead

With investors that you have a strong relationship with, it may take just a single meeting to receive a term sheet or a commitment to invest through a convertible note or SAFE. But with most investors, a successful initial meeting generally leads to secondary conversations.

In most rounds, it takes one investor taking the lead and committing to the round before other investors start to come in to fill the round. Your number one priority in your early pitch meetings is to gauge who is most likely to lead, and get their commitment. In addition to being first in a round, the lead investor also generally makes the largest investment.

Rounds that include many investors, but no lead investor, are referred to as party rounds. Party rounds are not generally viewed positively, as they can signify that no particular investor believes in the deal enough to lead. They can also mean that when it comes time for the company to raise its next round, no investor is invested enough to help the company succeed. Party rounds are sometimes done out of necessity (you can’t ...

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