Almost everyone who is tracking the startup ecosystem is well aware of different ways to secure funding for their company, but the process of raising funds is still a complex topic for many.  Any entrepreneur who is looking to raise venture capital financing, securing a term sheet seems to be the obvious first step. However, that is not the ONLY step! The process of raising and closing the investment round entails several stages and some of those could be time consuming depending on a variety of factors. The average time taken to close a venture capital deal i.e. the time period between receiving a term sheet and the investment amount being wired to the bank account is between 45-90 days.

The detailed process of raising a venture capital financing, from drafting a term sheet to closing of the definitive agreement, has been explained below:

Term Sheet

Term Sheet is the first and foremost document that outlines all the principal commercial, economic and governing terms and conditions of the proposed investment; which typically include the pre-money valuation of the company, the instrument of the transaction structure, investor’s rights and obligations, board composition and management control rights, among others . It is entered between the parties to facilitate negotiations for the proposed transaction and is an expression of intention only. A term sheet is a non-binding document which does not constitute an offer, agreement, agreement in principle, agreement to agree or commitment to provide financing.

However, some clauses of the term sheet, such as ‘exclusivity’ and ‘confidentiality’, can be binding in nature. For instance, investors usually require the founders to sign up for an exclusivity period that ranges between 30 to 45 days. During this exclusivity period, a founder is not permitted to seek funding from any other potential investors. However, if a startup wishes to raise a round with multiple investors, then, subject to the ‘exclusivity’ clause, the founder is under an obligation to specifically notify the investor and get their requisite consent. Alternatively, founders may also decide not to sign-up for the ‘exclusivity’ clause depending on the requirements of the company and negotiations with the investors.

Term sheet is a technical document and it is imperative for founders to be aware of the  standard market practice. Thus, for the benefit of the founders, it is usually suggested to engage someone who closely works with venture transactions.

Due Diligence

For venture capital investment process, due diligence means a rigorous investigation and evaluation of an investment opportunity prior to closing of the definitive agreements and wiring investment amount to the company. Investors evaluate key risks of the company by conducting a corporate, secretarial, legal and financial diligence prior to investment. The investors are also keen on confirming the accuracy of the financial filings including tax returns, shares allocation, employment agreements, other material contracts and details of the company. Investors also wish to ensure that there are no pending disputes involving the company and that the company is the rightful owner of all Intellectual Property and the rights attached to it.

It is advisable to procure a due-diligence checklist well in advance to enable the parties to anticipate most of the information potentially required for a due diligence process. Based on that, the founders should ensure that the compliance/legal teams compile all relevant documents to make the process faster and more efficient.

Definitive Agreements

Definitive agreement is an elaborate form of the term sheet wherein each of the terms are reinstated and explained along with detailed mechanisms regarding the implementation of those terms. The term sheet shall automatically stand terminated upon execution of the definitive agreements which are binding in nature. Depending on the instrument used to raise capital, agreements can either take the form of a Share Subscription and Shareholders Agreement or a Compulsory Convertible Debentures or an Investors’ Rights Agreement.

Given that the definitive agreements tend to be technical and detailed, founders must seek advice to ensure that the terms agreed in the term sheet are captured in the correct manner in the definitive agreements. At times the definitive agreements could include some additional terms, not detailed in the term sheet, which need to be negotiated to protect the interest of the company and the founders. The appointed legal counsels should not only make their respective parties aware of the intricacies of the definitive agreements but should also provide them with practical solutions.

Conditions Precedent

Conditions Precedent (CP) are key items that a company should fulfil before closing the transaction, i.e., wiring the investment amount into the company. An investor’s obligation to wire investment amount is subject to fulfilment of the conditions precedent which might vary from investor to investor. Certain standard conditions precedent, captured in most of the transactions, which prospective investors usually insist on are: a complete due diligence of the company to be completed to the satisfaction of the investor, submission of a detailed budget/ business plan, obtaining of all the required regulatory permissions, approvals or consents for running business operations, amendment of the company’s articles and memorandum of association and any existing shareholders agreement to permit the issuance of the subscription securities and all associated rights.

Sometimes, fulfilling certain conditions such as obtaining licenses or approvals take a lot of time, even months. In such cases, founders can negotiate and keep limited/specific items in the conditions precedent list and include items that may require additional time to be listed as ‘Conditions Subsequent (CS)’.


Closing is the last stage of the transaction when the investment amount is wired. The company generally provides a ‘CP Confirmation Certificate’ to the investors evidencing the fulfilment of all the identified conditions precedent.

Post-closing, the company is required to:

  1. hold board and shareholders meetings to pass appropriate resolutions to issue/allot shares and the appointment of directors nominated by the investors (if any);
  2. complete Registrar of Companies compliances and RBI compliances (if any) under the prescribed laws within the prescribed time limits.

It is advisable for the company to complete all the compliances and provide the investors with validly stamped agreements and share certificates.

Due to the technicalities involved in structuring venture capital funding transactions it is crucial for the parties to appoint legal advisors who are able to anticipate issues and guide entrepreneurs towards the right direction.

Expertise in: Financial aid for start up / legal advisory / Funding help / Investment guidance / Series A Series B funding


A young Delhi based lawyer focused on supporting start–ups with fundraising efforts as well as other legal requirements – has represented over a 150 clients and structured over a 100 venture deals nationally as well internationally since the incorporation of her firm – Burgeon. Roma Priya has successfully guided companies seeking investments across seed, angel- stage and subsequent funding rounds. She has also represented marquee investors (HNI’s, Angel Groups, Funds) who invest in early and growth stage companies.

Having worked/advised hundreds of entrepreneurs and startups in the last six years, Roma started receiving a lot of incoming leads and referrals from potential clients even before she incorporated Burgeon. Closely working with entrepreneurs, she too was hit by the entrepreneurial bug and decided to venture out on her own and Burgeon was incorporated in October 2015 as an extension of her deep passion for entrepreneurship with a commitment to support entrepreneurs and their startups through their life cycle.

A woman with exceptional oratorical skills, Roma is extremely passionate and enthusiastic about the startup ecosystem in India and strongly believes that sector has a huge potential for growth.

Burgeon provides legal assistance in investments for early & growth stage startups and ensures they understand the intricacies of the agreements. Roma’s objective for Burgeon is to create a ‘one-stop support system’ of services for entrepreneurs and investors. The company is a venture-focused boutique practice that provides cost-effective, experienced and reliable legal advice as well as customized business solutions.

Roma holds a degree in International Business Law and Corporate Law from Symbiosis International University, Pune. She has previously worked with renowned names like Kotak Mahindra Bank Ltd and Sand Hill Counsel, a well-known law firm with offices in Mumbai, New Delhi and Silicon Valley.