The money is transferred to the startup, and their post-money period begins, with the VC firm on-board. ClosingĪn offer is made to the startup, and a term sheet is drawn up outlining the terms of the deal. The results of the due diligence process of each of the potential investments are brought before the investment committee - usually comprising the partners, some external advisors, managers, and other select individuals - to give the final verdict, and decide which companies are worthy of an offer. With several due diligence processes running at once, the VC firm is likely to conduct this process using technology.Īdditionally, get yourself a copy of our venture capital due diligence checklist VCs use to evaluate companies.

‍ Due diligence in venture capital is a complex process, whereby the VC firm will ‘look under the hood’ of the startup, understanding the business better, and seeing where the company’s risks and opportunities are. They’ll also use these reviews to discuss potential offers to the startups they’ve seen. Having met the startup founders and familiarized themselves with the business model, the partners of the VC firm will hold an internal review - usually once every two-four weeks, to discuss the companies that they see having the most potential. More than a ‘getting to know you’ meeting, as would be the case with a regular first interview, this ia ‘do I want to invest in you’ meeting. Initial meetingĪs the name suggests, this is where the VC firm meets the startup founder and his/her leadership team. Getting past this stage is arguably the hardest of all, as impressing the people who’ve got the ability to write checks is key in VC funding. Once a company has made it past screening, an analyst passes the pitch deck to the VC fund’s partners who provide a second, more rigorous set of criteria. This involves a designated analyst looking through startup pitch decks, and filter out what appear, at first glance, to be the best candidates for investment (usually around 15-20% of the pile). The process through which VC investors work their way through the thousands of applications for funding is known as screening.

This is the beginning of the VC investor process… 1. Look at the website of any venture capital fund, and they outline what they’re looking for (revenue, technology, industry, etc.) to filter out as many unsuitable companies as possible. The rise of the venture capital industry, and the countless financial press coverage given to unicorns (startups that achieve valuations of $1 billion or more before an IPO), means the big venture capital firms receive hundreds of applications for funding every week. The venture capital process for investors Getting the process right, and ensuring capital flows to the ideas that will succeed, goes well beyond just investor returns.īelow, we look at the process for investors and startups. This brings benefits for the startup founders and their employees, the venture capital investors, and often society at large, who gain access to a new product or service that enhances their quality of life. The end goal for venture capital is for investor capital to flow to the best ideas. At the VC stage, the startups, early-stage and emerging companies usually require investment to fund their growth ambitions, which is beyond their present ability to generate cash.

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