Private Equity Funding Proces
Step 1
The Company needing funds is introduced to the venture capitalist and the funding process begins with initial review of the proposal by venture capitalist to ascertain if it fits with the vc’s investment criteria.
Step 2
The venture capitalist meets with the entrepreneur and the key members of the management team to review business plan and sees how much the team understands the key dimensions of business.
Step 3
An initial due diligence is conducted by the venture capitalist to understand the business opportunity, team strength, industry outlook and market etc.
Step 4
Signing of term sheet containing the terms of investment between the venture capital firm and the company where funds are to be invested. It is also known as Memorandum of Understanding (MOU)
Step 5
Once a proposal has passed through the stage of signing term sheet, it is subjected to a detailed evaluation or due diligence process. The venture capitalist also studies the industry carefully to obtain information about competitors, entry barriers, product life cycles and distribution channels. The investment valuation is carried out to ascertain an acceptable price for the deal.
Step 6
The venture capitalist and the investment company negotiate the terms of the deal, i.e. the amount, form and price of the investment. This process is termed as deal structuring. If approved, the legal documents are prepared and signed.
