How To Obliterate A Multi-Million-Dollar Fundraising Process During Due Diligence

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As soon as you capture the attention of a VC, they’re going to start performing the “due diligence” required to justify the investment. This is when the investor checks into the bold claims you have made about the size of your market opportunity and your work experience. The process effectively begins as soon as the VC has a real interest in pursuing your deal, and steps up when you’re offered a term sheet.

The conventional “gentleman’s agreement” in this period of formal diligence is that, barring some revelation about the founder’s character or a previously overlooked problem with the market, a deal will consummate. The diligence process is designed to act as a safety valve for VCs. Unfortunately, it’s also when thoughts of the “winner’s curse” may take hold in an investor’s mind.

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photo CC by Simon Cunningham

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