What happens after a term sheet?

The term sheet isn't the finish line. It's the second half of the process.

Founders celebrate a signed term sheet like the round is closed. It isn't. A term sheet is a non-binding intent to invest, subject to 4-6 weeks of due diligence and legal paperwork. Real closes happen when the money hits your bank account, not when the term sheet PDF is signed.

Between term sheet and close, more rounds die than you'd think. Investor gets cold feet. DD surfaces a problem. Follow-on investors drop out. Lawyers argue over side letters. Wire delays push you past your soft-cap date and someone re-trades terms.

Knowing what happens post-term-sheet is how you close cleanly instead of losing the deal in the last mile.

The 4-6 week timeline

Week 1 — Term sheet signed, DD scope agreed

• Term sheet countersigned
• Investor sends a DD checklist (financial, legal, customer, technical, team)
• You set up a data room (Google Drive folder is fine)
• Kick off DD calls with investor's operations team or associate

Week 2 — DD documents delivered, references scheduled

• Financials, cap table, contracts, customer list, tech architecture — all delivered
• Reference calls with 5-10 customers, 2-3 previous investors, 2-3 former employees or advisors
• Any technical DD (code review, security audit) begins

Week 3 — DD questions + answers, initial legal docs drafted

• Investor's team asks follow-up questions on the delivered materials
• Lead investor's lawyer drafts investment docs (SAFE amendments, priced round docs if applicable)
• Your lawyer reviews and starts markup
• Follow-on investors are looped into the closing

Week 4 — Legal negotiation, closing docs finalized

• Back-and-forth between the lawyers
• Board consent + shareholder consent where required
• Board resolutions drafted
• Closing checklist finalized

Week 5 — Signature package + wire prep

• All closing documents signed by all parties
• Investor wires funds (typically same day or next business day after signature)
• Cap table updated
• Round officially closed

Week 6 — Post-close cleanup

• 83(b) elections filed if any founder shares repurchased
• Board meeting scheduled
• Investor onboarded (data room access, monthly reports, board observer rights if applicable)
• Round-close announcement (LinkedIn, Twitter, press if applicable)

If everything works cleanly, 4-6 weeks. Complications extend it to 8-10 weeks.

The traps that kill deals in this window

Trap 1 — DD scope creep

Some VCs use DD as a "keep asking" mechanism. Every week they need something new. If you're 4 weeks in and still delivering fresh docs, ask directly: "Is there anything else you need to close, or are we in follow-up territory?"

Force the scope conversation. Open-ended DD is a warning sign.

Trap 2 — Discovered problems

Something in DD surprises the investor:

• Customer references reveal a churn issue you didn't disclose
• Legal review surfaces an unpaid contractor with an equity claim
• Technical review flags security or scaling issues
• Cap table has orphaned promises (advisor equity you never issued)

Most of these are recoverable if you disclose proactively. All of them are potentially deal-killing if the investor discovers them without warning.

Best practice: pre-empt them. Send a "here's what will come up in DD" doc before DD starts. Names the issues, explains context, shows resolution or path. Investors respect disclosure.

Trap 3 — Lead investor cold feet

Between term sheet and close, sometimes lead investors decide they don't actually want the deal. Reasons:

• Their partnership pushed back post-term-sheet
• A competitor deal came into their pipeline
• Their fund's LP situation changed
• They found a new red flag

Watch for signals: slow email responses, missed calls, "we need to discuss this internally" language 3+ weeks in. If you see cold feet, address it directly: "Sensing hesitation — is there a specific concern I can address?"

Sometimes you can save it. Often you can't. Better to know early than at signature.

Trap 4 — Follow-on investors dropping

The lead's term sheet often assumes follow-on investors will fill the round. If a $2M round has $1M from lead and $1M from follow-ons, and one follow-on drops mid-DD, you're now at $1.5M. The lead may reconsider terms or pull out.

Manage follow-on investors like a portfolio. Weekly touchpoints. Same DD access. Same closing calendar. Don't assume they'll show up at signature.

Trap 5 — Legal document delays

Lawyers cost time. Especially:

• Side letters with specific investors (usually take longest)
• Board composition disputes
• Anti-dilution provisions (if pricing a round)
• Vesting acceleration triggers
• IP assignment issues (if any founders have complicated employment history)

Have a startup-specialist lawyer. Not a generalist. Speed matters. Every week of legal delay is a week the deal could die.

Trap 6 — Wire delays

Wires from institutional funds can take 3-5 business days to process. Sometimes longer if it's a fund-of-funds structure. Plan for this. If your closing date is "October 15th" and wires take 5 days to process, target signature on October 10th.

Nothing worse than a signed deal with wires stuck in processing when the founder ran out of runway.

What to prepare in advance to close cleanly

Before you have a term sheet, prepare the DD material. Reasons:

• Speeds up the closing window
• Signals professionalism to investors
• Reduces risk of "surprise" issues

Standard DD package:

Financial

• Last 12 months of P&L (monthly)
• Current burn rate + runway
• Cash balance + bank statements
• Cap table (post-close projected)
• All existing agreements: SAFEs, priced round docs, advisor agreements
• 12-month forecast

Legal

• Certificate of incorporation
• Bylaws
• Board consents to date
• Stockholder agreements
• IP assignments from all founders + contractors
• Any pending litigation or dispute status
• Employment agreements

Customer / Traction

• Cohort retention data
• MRR history month-by-month
• Top 20 customers with revenue contribution
• Customer contract templates
• 3-5 customer reference contacts (pre-briefed)

Team

• Team roster with titles + start dates
• Founder bios + LinkedIns
• Key hire pipeline

Technical

• Architecture overview
• Security/compliance certifications (SOC2 in progress = ok, absent = flag)
• Any critical dependencies (Anthropic API, third-party services, etc.)

Have this ready before you sign a term sheet. Saves 5-7 days in the closing window.

Common closing mistakes

• Slowing down after signature. Term sheet is signed, founders relax, DD drags for weeks. Don't. Push pace as if the deal isn't closed. Because it isn't.
• Assuming the lawyers will manage timing. They won't. You have to project-manage the close.
• Not tracking follow-on investors weekly. They can drop silently. Weekly check-ins keep them engaged.
• Waiting for the lead's questions before delivering DD. Deliver the full DD package on day 1. Don't wait to be asked.
• Negotiating side letters late. Any special terms (pro-rata, information rights, board observer) should be discussed in the term sheet phase, not the closing phase.
• Forgetting about 83(b) elections. Founders must file within 30 days of stock issuance. Missing this creates tax problems.
• Not communicating close-date pressure to all parties. Wire dates matter. Signature dates matter. Communicate them clearly to lead + follow-ons + lawyers weekly.

What to skip

Founder-side myths about closing:

• "The deal is done at term sheet." No. Term sheet is intent. Wire is done.
• "The lead handles everything from here." Wrong. You still drive the process.
• "DD is a formality." Sometimes yes, sometimes no. Always assume it's real.
• "Once the term sheet is signed, price is locked." Terms can be re-negotiated if DD surfaces new issues. Not common but possible.
• "Lawyers won't cause delays." They will. Manage them.

Get an agent that runs this with you

Managing 4-6 weeks of DD delivery, tracking follow-on investors, coordinating with lawyers, keeping the lead engaged, ensuring nothing drops between signature and wire — that's the operational load of closing cleanly.

raise(fn) is the agent that runs your raise with you. Targets the right investors, drafts outreach, preps meetings, tracks pipeline, and stays with you through the close: DD material organization, follow-on investor management, timeline projection, milestone tracking.

You don't fill out forms. You don't run a CRM. You raise, and the agent handles the rest.

FAQ

How long does it actually take from term sheet to close?

4-6 weeks in a clean deal. 8-12 weeks with complications. If it drags past 12 weeks, something is wrong.

What happens if diligence surfaces a problem?

Depends on severity. Small issues = disclosed and addressed, deal continues. Major issues (undisclosed litigation, huge customer churn, technical time-bomb) = deal may re-price or die. Disclose early.

Can the investor pull out after signing the term sheet?

Yes. Term sheets are non-binding on both sides (usually — read yours carefully). Investor can walk. Rare but possible.

What if I get a second term sheet during the DD window?

Discuss with your lawyer. Some term sheets have exclusivity clauses. If yours doesn't, you can potentially create a bidding war. If it does, you may have signed away optionality.

Should I hire a lawyer just for the closing?

Yes. Startup-specialist, not generalist. Cost: $10-30K for a seed round close. Worth every dollar.

What's the biggest reason deals die post-term-sheet?

Communication breakdown. Founder disappears, DD drags, lead loses conviction. Stay in touch weekly. Force pace.

Can I open new investor conversations while in DD with the lead?

Nuanced. If you have exclusivity in the term sheet, no. Without exclusivity, you can — but focus. Better to close the deal you have than jeopardize it chasing a bigger one.