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Home::Small Business

Venture Capital - What Happens After The Due Diligence Process

Author : Evan Carmichael
If the venture capitalists are interested in your company after completing their due diligence, they will offer a binding term sheet. It will reflect the draft term sheet that has already been agreed to but this one will be a legal contractual agreement. Then the real negotiations start.



There are different types of financing to consider: debt, equity, and mezzanine.



Debt financing is the most objective and is therefore the easiest to negotiate. If you have the assets to support the debt and the income to support the interest payments, the negotiation period will be very short.



Equity financing negotiating is more complicated and revolves around agreeing on valuation and percentage ownership. Discussions usually requires several days.



Mezzanine financing involves a mix of equity, debt, convertible debentures and preferred shares. Negotiating the technical aspects of each so that an agreement can be reached between the investor and your company can be time consuming.



Another dictating factor is the number and variety of financing offers that you receive. It is the intermediaryÂ’s role to help you bring more than one offer to the table and assist you in evaluating and negotiating which one is best suited to your companyÂ’s needs based on their previous experience.



Venture capital term sheets are time limited. You have to quickly make up your mind if you want to accept or reject the offer. The short time period is in place to prevent you from using one term sheet to solicit new offers from other venture capitalists.


Article Source: http://www.articledashboard.com





Evan (www.evancarmichael.com) is an entrepreneur and international speaker. At the age of 19, Evan became an owner and Chief Operating Officer in Redasoft, a biotechnology software company. The company quickly grew to over 300 organizations as clients, including NASA and Johnson & Johnson, in 30 countries. As a presenter, Evan has spoken on Modeling Masters techniques to world leaders and entrepreneurs at APEC Forums in Mexico, Brunei Darussalam, and Taiwan in addition to being a keynote speaker at over 100 events in Canada. He also has a background in the venture capital industry helping entrepreneurial companies raise between $500,000 and $15 million to grow their businesses. Find out more at www.evancarmichael.com.





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