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How many meetings does it take to get a term sheet?

Specifically, for angel/private investors in the software/web industry, how many meetings and/or weeks it may take before they provide a term sheet or some equivalent indicator that they are genuinely interested?
For that matter, is it unusual (or even possible) to get a term sheet after the first meeting? Has anyone had this experience?

Just in case, it's hardly an academic question. I need to know whether to proceed with certain investors that I believe are simply stalling, while the rest of the team is more optimistic.

16 Replies

Steve Mock
4
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Steve Mock Entrepreneur
Co-founder and COO at Metric Insights
The answer is it depends on a number of factors. Are you doing a Seed round or a Series A or Series B or later financing? Also, are you asking an individual who will write you a check or a firm with a partnership.

Individuals might write you a check after the first meeting if you've already dictated the terms of the deal. I've seen small seed firms do it, but it is rare.

A firm will usually have a partner meeting where they will make a go or no go decision. So, the key item is for the partner who is your champion to get you into their partner meeting for a vote. Obviously, if they invite you to the partner meeting to present, you are in pretty good shape.

It sounds like you are in an ambiguous area. A question you could ask is, "So, what is your process for making an investment decision?" Based on their answer, ask if they are ready to go to the next steps. If they hesitate, you can ask why aren't you going to the next step if that is part of their process.

For example, they might say we'd like to talk to a few customers. You should queue up the meetings. If they don't move pretty quickly, you know there is something else going on.

If they say something ambiguous like, "We'd like to see more traction" with no follow ups, just assume it is a no.

Kurt Johnson
2
0
Kurt Johnson Entrepreneur • Advisor
President, CEO
It depends on the round. The issue is that angel groups and investors are 'invisible' and nuanced, meaning they have the types of companies or industry segments they love, understand and are willing to invest in. Subsequently, at the seed round it's as arbitrary as selling a house. As you get into larger rounds, it's more standardized. I would treat whatever stage you're in as a sales cycle with a 6-9 month close rate. That said, you can get the impulse buy, however for the 70%-80% of your funding, I'd expect a six round sell, with 3-sh weeks between each meeting. Stage 1: initial pitch, stage 2: a few discovery questions, Stage 3: Pitch to larger group, Stage 4: Discovery (proforma, biz-plan, etc.), Stage 5: Terms discussion, Stage 6: Close. Important questions to ask early are: 1: What types of businesses do you invest in (industry, Pre/post rev, concept/MVP, etc), 2: Are you funded or can you cut a check, 3: what is your process for evaluating companies, and time frames, 4: What are you specifically looking for in a 'good' investment? Hope that helps. Good selling.
Dimitry Rotstein
0
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Dimitry Rotstein Entrepreneur
Head of R&D at SafeZone
Right, I forgot to mention it.
We're talking about a seed round, the product is in development, and no revenues yet.
All prospective investors are individuals, as far as I can tell.

Christopher R. George
0
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Christopher R. George Entrepreneur
President and CEO at George & Company
After 35 yrs. in the M&A arena and with all the dry powder in PE, if properly packaged we generally receive multiple LOI's within 2 of weeks of launching an offering. The pre-08 auction atmosphere has returned!
Steve Mock
0
0
Steve Mock Entrepreneur
Co-founder and COO at Metric Insights
Have you set the terms of the round in a term sheet? Or, are you waiting for another investor to set the terms of the deal? -- Steve Mock +[removed to protect privacy]
Neil Licht - HereWeAre
2
0
Want To find-close Business Online without competition Before They Google Search? We solve this problem 1(508)-481-8567
Actually, to determine genuine interest, just ask for the feedback. "So how does this sound as an investment path for you?".

Get the answer andgageit.Dontlet a fuzzy answer suffice.

If its fuzzy or great or we will discuss the idea or a flat out no as an answer and frankly, you really need to know that answer and its meaning at the first meeting, ask to understand why that was the answer.

If the answer is encouraging re possibly investing, ask what is the part that says "Good idea worth an investment, what part needs a bit of clarification or redefining so the investment can be made".

Remember also to ask "who along with you would be involved in the review and decision to invest process" Thats how you know how to proceed so all the folks involved can be reached, met with and sold so for their reasons not yours they all say yes.

That might be "Whats the next step re gaining the investment approval and who along with you would be involved in the assessment process?"

It's a process and its also a salesapproach combined so you get to yes or no as quickly as possible and so you understand how to get to yes and can then go that route.

YOU control that process via the above approach and you are not left up in the air wondering if things will work or not.
Dimitry Rotstein
0
0
Dimitry Rotstein Entrepreneur
Head of R&D at SafeZone
> Have you set the terms of the round in a term sheet? Or, are you waiting for another
> investor to set the terms of the deal?

I'm not sure (our CEO is doing all the work in this matter), but I think there is a very specific amount and price per share already set.
Andrew Lockley
0
0
Andrew Lockley Advisor
Investor and strategy consultant
Hot dates don't do the chasing. Be the hot date.
Kurt Johnson
0
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Kurt Johnson Entrepreneur • Advisor
President, CEO
...good comments on this string.Only thing I'd add, is that it's key to be in the mindset that you're selling your company, or a sliver of it. As a seller, you're looking for the best you can get.

Desperation, disorganization, a small pipeline- all lend themselves to taking the first deal that comes through.

Pipeline strength, customers, a clear line to rev, all lend themselves to choice in whom you sell to.

I've exited one startup where we were desperate, and we took what we could get. It was appropriate for that scenario. I've been in others where we commanded a premium. Bottom line- there's no right way, it's contextual, so do what's right for your biz.

You're selling your company, so understand the terms your willing to sell your sliver of your investment of blood/sweat/tears/hope/future for.

Thomas J. Kaled
1
0
Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
Whenever I've raised seed money I have never waited. I have moved from prospect to prospect with a Term Sheet, Investor Qualification Form and Liability Waiver.

In the Term Sheet is a base business plan, projection, qualified equity offer and timeline to close (or financial criteria to start the venture). The qualification is for our State Investors and the Liability is self-explanatory.
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