- The dollar amount of the investment the firm wants to make.
- The level of ownership – basically a percentage of the company – they expect in return.
- Other terms the VCs need to protect themselves, whether that includes board seats or conditions such as that the company cannot be acquired without the investors' approval.
Term sheets are usually presented to the company in person by VCs. After reviewing and evaluating term sheets, it's time to close the deal. "The key here: always keep your options open," says Dinsdale. "It can be difficult to say to a potential investor you've decided to go elsewhere for funding, and it helps if you can have a Plan B in place, if your Plan A stalls during the closing process."
Maintaining the Relationship with VCs
Most VCs stay in touch with the company on a regular basis after the documents are signed, and funding has been granted. "We tend to be involved in our companies but we don't want to micromanage," Ibrahim says. "It's a delicate balance." Companies should expect to make regular updates to investors, oftentimes done at board meetings. "Always keep honest communication open," Dinsdale says. "As long as you are diligent and they don't have to chase you down to get information on their investment, they'll be happy. If some aspect of the business isn't working well, they'll work with you to fix it. If business is going well, they'll expect you to continue to do what's working."
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Recommended Resources
National Venture Capital Association
Made up of more than 400 member firms, the NVCA is the trade association that represents the U.S. venture capital industry and tracks industry data.
Startup Junkies
An online resource center for start-up entrepreneurs by veteran entrepreneurs.
The Kauffman Foundation
One of the largest foundations in the United States devoted to entrepreneurship.
StartUp Nation
The three most important elements of an elevator pitch to investors.
Canaan Partners Pitchbook
Venture capital firm's online tutorial on pitching a business concept to potential investors.
