8 Stages of a Venture Capital Fundraising Process

Venture capital finance is nuanced in ways that other types of business funding are not.

These differences touch on areas such as the funding structures, the level of input into company strategy from the investors, and even whether a mentorship is envisioned.

Funding, although undoubtedly the most important component, is just one of the considerations for startup founders when deciding among VC investors.

We at FirmRoom help dozens of companies with fundraising and in this article, we look at how the fundraising process generally tends to play out, across 8 steps. So let’s dive into how to raise venture capital money.

VC Fundraising Process Steps
Ensuring readiness for venture capital
Getting the word out
Developing the pitch deck
Choosing investors
Early stage Meetings
Late stage Meetings
Term sheet
Post- Term Sheet Due Diligence and Closing
Check also: 7 Crucial Steps to Take Before a VC Fundraising Round

1. Ensuring readiness for venture capital
When beginning the VC fundraising process, a good maxim to remember is the old Steve Martin line:

“be so good that they can’t ignore you.”
This is another way of saying – make sure the business is ready, commercially viable, and preferably scalable, before approaching VC investors or looking to raise startup capital.

By ‘ready’, we mean that it’s important to have a minimal viable product (MVP). Your sales to date should also show a trajectory that’s impossible for investors to ignore.

If you’re in an online subscriptions business, bring your churn down.

In short, whatever your business, remember the maxim.

As part of your company’s efforts to ensure readiness, open and maintain conversations with as many VC funders as possible. Attend workshops and events.

At this stage, the dialogue shouldn’t be led by the need for funding, but rather to be part of the startup ecosystem.

They may send you interesting material, introduce you to relevant contacts, or inform you of developments in your part of the industry – for example, funding of competitors – that may have passed you by.

Above all, keeping your company’s name at the top of investors’ minds is a strategy that will pay dividends later on.

What is a minimal viable product?
A minimum viable product (often referred to as to by its initials, ‘MVP’) with just enough features to introduce the product’s core value proposition to customers.

The idea behind the MVP is to bring the product to market, test it with early users, allowing them to sample its benefits and to provide feedback for later versions.

An example of an MV would be a currency transfer service with 2-3 transfers available (say US dollars, Euro, and Mexican pesos). A more extensive range of currencies would be added after the MVP’s release.


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