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If you’re raising on SAFEs, the process is complete once investors sign and wire you the money. You can keep raising on SAFEs, or you can stop. But if you’re raising a priced round with a lead investor, you’ll need to sign a term sheet and complete a few other steps before closing the round.

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Steps from signing term sheet to close

After you sign the term sheet, you’ve agreed to some preliminary terms of the deal, like how much you’re raising, at what valuation, board seats, governance terms, liquidation preferences, etc. After that, lawyers on both sides start drafting the full stock purchase agreement. This is where nuanced back-and-forth decisions get made about things the term sheet left out. This process is where lawyers typically add the most value for you, but it’s also where they charge the most money.
The whole process from signing the term sheet to closing the round usually takes 2-6 weeks.

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Investor due diligence

During this phase of the process, investors are usually just trying to answer two questions: First, are the numbers you presented previously accurate and truthful? Investors usually get a junior teammate or third party to verify your claims. If you pitched a current ARR of $5M, they will ask for the backup numbers to verify customer contracts, proof of payment, accounting records, and bank statements until they can peg that revenue to a verifiable source showing cash in the bank. Second, are there any big risks that you did not mention, knowingly or not? Maybe your entire product is built on top of one single platform vendor that could shut down your product on a whim? They may also check things such as whether you have filed and paid your corporate income taxes each year; if not, you may have a hidden tax liability, and they will want to know about it. During the diligence phase, provide the requested information as quickly as possible. Ideally within a few hours, but never more than a day.

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Deal’s not closed until cash is in the bank

Plenty of founders have assumed a deal was done after diligence wrapped, or in the hours before the wire when the investor texted saying everything was good to go, only to have it fall through at the last minute. Make sure not to think the deal is closed until you see the wire hit your bank.