Running the Process: Momentum, Follow-Up and Getting to a Term Sheet

Run investor conversations in parallel rather than one at a time, prioritized by how likely each investor is to say yes and how good that yes would be, because serial talks remove the pressure that makes investors act ^[1]. Investors heavily weigh other investors' views, so the first substantial commitment is often the hardest step, and a commitment should be treated as real only once it is confirmed in writing and the money is in the bank ^[1][2][4]. VC firms surveyed by Gompers, Gornall, Kaplan and Strebulaev consider roughly 100 opportunities per deal closed, and the average deal took 83 days to close with 118 hours of diligence, so founders should plan the process around that funnel ^[5].

A raise is a process, not a string of meetings

Paul Graham advises founders to talk to investors in parallel rather than serially: founders cannot afford the time serial talks take, and an investor who is the only one in the conversation feels no pressure to act ^[1]. He frames the search as breadth-first and weighted by expected value, defined as how likely an investor is to say yes multiplied by how good it would be if they did ^[1]. He also warns that fundraising is a segment of time, not a point, and that what happens to the company during that window affects the outcome: if numbers grow between two meetings, investors are eager to close, and if numbers are flat they start to get cold feet ^[1]. Because fundraising is so distracting, he advises founders to be either in fundraising mode or not ^[1].

The practical implication is to compress. Prepare materials, the data room and the target list before the first meeting, then schedule first meetings in a tight window so that interest, follow-ups and decisions overlap. A raise that dribbles out over many months tends to lose both momentum and the company's operating focus.

How the investor's own funnel works

A survey of nearly 900 institutional VCs at 681 firms by Gompers, Gornall, Kaplan and Strebulaev (NBER Working Paper 22587, 2016) found that for each deal a firm closes, it considers roughly 100 potential opportunities ^[5]. About one in four leads to a meeting with management, about a third of those are reviewed at a partners meeting, roughly half of those proceed to due diligence, and about a third of companies reaching diligence are offered a term sheet ^[5]. The average deal took 83 days to close, the average firm spent 118 hours on due diligence and called 10 references, with late-stage firms calling more references than early-stage firms (13 versus 8) ^[5]. Firms offered about 1.7 term sheets per deal closed, a close rate of roughly 60%, because competing term sheets and problems in legal documentation can cause deals to fall apart ^[5].

That funnel is the right shape for a founder's pipeline, too. Track every investor by stage (researched, intro requested, first meeting, follow-up, partner meeting, diligence, term sheet, closed or passed), and note the next step and date for each. A simple CRM or spreadsheet is enough if it is updated after every interaction.

Momentum: leads, herds and the first commitment

Graham observes that the biggest component in most investors' opinion of a startup is the opinion of other investors, which is a recipe for exponential growth once interest begins and a hole to climb out of before it does ^[2]. Getting the first substantial offer can be half the total difficulty of fundraising, and money from friends and family usually does not count, no matter how much ^[1]. YC's seed guide likewise notes that once the first money is in, each subsequent close gets faster and easier ^[3]. For that reason Graham suggests estimating not just whether an investor will say yes but whether they are likely to be the first to say yes, and placing less weight early on investors who will only follow others ^[1].

Competitive tension is legitimate only when it is real. Graham notes founders are safe telling a preferred investor that they are far along with another firm so long as it is true, but advises never telling one VC which other VCs the founder is talking to ^[2]. Inventing interest is both poor tactics and, in a securities offering, a misstatement; the previous lesson covers why.

Reading signals and hearing no

Graham advises treating investors as saying no until they unequivocally say yes, in the form of a definite offer with no contingencies, because some investors seem about to invest right up until they say no, or simply stop replying, to keep a free option ^[1]. YC's Handshake Deal Protocol addresses the same problem: a handshake deal exists only when the investor says 'I'm in,' the startup sends a message confirming the exact amount and terms, and the investor replies yes ^[4]. YC's guide notes that investors have many different ways to say no and that the hardest part for founders is recognizing when they are being turned down ^[3]. When options dry up, Graham says they usually do so the same way, and he advises stopping rather than continuing when the process is only returning air ^[1].

• Positive signals: the investor proposes the next meeting before you ask, brings in a partner, requests specific diligence items, and explains their decision process and timing.
• Neutral signals: requests for 'more data' with no specific question, or 'keep us posted' without a next step.
• Negative signals: slower replies, rescheduled meetings, and new conditions that move the decision further out; Graham notes some investors never say no and simply stop replying ^[1].
• A useful question at any stage: ask how the firm's process works and where you are in it, which Graham recommends for inexperienced founders ^[1].

Updates, follow-up and diligence after the pitch

Follow up within a day of each meeting with the materials promised and a proposed next step. Between meetings, short progress notes that report real milestones (a signed customer, a product release, a strong month) put the 'segment of time' principle to work; they should use the same metric definitions as the deck. When diligence begins, expect reference calls, customer calls, and requests for primary documents, consistent with the multi-step process and reference-checking the Gompers survey describes ^[5]. A data room built before the raise starts keeps diligence from becoming the bottleneck.

From term sheet to close

In the process the Gompers survey describes, a firm presents a term sheet after diligence; if the company accepts, legal documents are drafted, a commitment is signed and the deal closes ^[5]. Some firms issue pre-emptive term sheets before formal diligence in an attempt to lock up a deal ^[5]. Graham regards a deadline of three working days on an offer as acceptable when the founder has been talking to investors in parallel, and treats much shorter 'exploding' deadlines as a warning sign ^[1]. Once an investor says yes, YC's guide advises getting the signature and the cash as soon as possible ^[3]. What the term sheet should contain, and how preferred-stock terms work, is covered in the Raising Private Capital course in detail.

Later-stage and pre-IPO: organized roadshows

Later-stage and pre-IPO companies often pitch through an organized roadshow, a scheduled series of meetings with institutional investors run by the company's bankers or placement agent. In registered offerings, SEC rules define a road show as an offer that contains a presentation regarding the offering by one or more members of the issuer's management and includes discussion of the issuer, its management and the securities being offered ^[7]. Rule 163B lets an issuer, or a person authorized to act on its behalf, communicate before or after filing a registration statement with qualified institutional buyers and institutional accredited investors to gauge interest in a contemplated registered offering; those communications are deemed offers and need not be filed ^[8].

When a FINRA member firm acts as placement agent, its communications must be fair and balanced, may not contain false, exaggerated, unwarranted, promissory or misleading statements, and generally may not predict or project performance, subject to limited exceptions ^[9]. FINRA treats a written communication distributed or made available to more than 25 retail investors within any 30 calendar-day period as a retail communication ^[9]. Founders should expect an agent's compliance team to edit the deck accordingly.

What's different in 2026

As of September 30, 2026, the Q3 2026 PitchBook-NVCA Venture Monitor reports US VC deal value of $515.8 billion across an estimated 14,199 deals year to date, roughly 44% above 2021's full-year record, with AI companies accounting for 82.7% of deal value ^[6]. Q3 itself saw $98.4 billion across an estimated 5,012 deals, and deals of $100 million or more, about 5% of the quarter's deal count, accounted for 75% of its deal value ^[6]. First-time financings were strong, with $34.3 billion deployed across an estimated 8,625 deals through Q3 ^[6]. VC funds raised $108.5 billion across 699 funds, with funds of $500 million or more taking 78.1% of capital while making up 6% of funds closed, and only 18 companies went public in Q3 ^[6]. A J.P. Morgan commentary in the same report describes a bifurcated market in which perceived category leaders raise on favorable terms while others find the process prolonged and uncertain, and notes investors actively pre-empting rounds ^[6]. For most founders, that argues for a tighter, better-prepared process, a target list matched to investors who actually write checks at their stage, and realistic timelines.

Worked example: an eight-week seed process (hypothetical)

• Weeks 0-2 (preparation): finalize deck, model and data room; build a list of 60 investors scored by fit and likelihood of leading; line up warm introductions.
• Weeks 3-4 (first meetings): hold 25 to 30 first meetings within ten business days; log each in the pipeline with a next step.
• Week 5 (follow-ups): second meetings and partner meetings with the 8 to 10 most engaged firms; send a short update on the month's results.
• Week 6 (diligence): customer and reference calls; respond to data requests within 24 hours.
• Week 7 (term sheet): first term sheet arrives; tell remaining serious investors truthfully that you have an offer you would accept and give them a few days.
• Week 8 (close): confirm commitments in writing, sign, collect wires, and send a closing note to every investor who engaged, including those who passed.

Key terms

Parallel process

Running conversations with many investors at the same time so that interest and decisions overlap.

Lead investor

The investor who commits first, sets or negotiates the terms, and often anchors the rest of the round.

Deal funnel

The stages an opportunity passes through at a VC firm, from sourcing to meeting, partner review, diligence, term sheet and close.

Term sheet

A largely non-binding summary of the proposed terms of an investment, issued before definitive documents.

Handshake deal

A verbal commitment to invest; YC's protocol makes it real only when the exact offer is confirmed in writing.

Exploding offer

An offer that expires after a short deadline, intended to limit the founder's time to seek alternatives.

Road show

A management presentation about an offering to prospective investors, typically institutional, in a later-stage or public offering.

Testing the waters

Pre-offering communications to gauge investor interest; Rule 163B permits them with QIBs and institutional accredited investors for registered offerings.

Check your understanding

Sources

1. [1]Paul Graham (paulgraham.com), “How to Raise Money,” September 2013.
2. [2]Paul Graham (paulgraham.com), “Investor Herd Dynamics,” August 2013.
3. [3]Y Combinator Startup Library, “A Guide to Seed Fundraising (Geoff Ralston),” Accessed November 2026.
4. [4]Y Combinator, “The Handshake Deal Protocol,” Accessed November 2026.
5. [5]Paul Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev, National Bureau of Economic Research, “How Do Venture Capitalists Make Decisions? (NBER Working Paper 22587),” September 2016.
6. [6]PitchBook and National Venture Capital Association, “Q3 2026 PitchBook-NVCA Venture Monitor,” October 2026 (data as of September 30, 2026).
7. [7]Legal Information Institute, Cornell Law School, “17 CFR § 230.433 - Conditions to permissible post-filing free writing prospectuses (road show definitions),” Accessed November 2026.
8. [8]Legal Information Institute, Cornell Law School, “17 CFR § 230.163B - Exemption from section 5(b)(1) and section 5(c) of the Act for certain communications to qualified institutional buyers or institutional accredited investors,” Accessed November 2026.
9. [9]FINRA, “FINRA Rule 2210: Communications with the Public,” Accessed November 2026.

Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.