A startup fundraise is a sequence of legal, financial and governance steps—not a single signing meeting. After investors and founders agree on a term sheet, the company completes diligence, prepares definitive documents, obtains the required board and sometimes stockholder approvals, satisfies closing conditions, signs, receives the money and issues the securities. A simple SAFE can close in a few weeks; a later priced equity round commonly takes 30–90 days, depending on diligence, negotiation, jurisdiction and the company’s records.
The fundraising process at a glance
Most venture financings follow this order, although the documents and approvals change with the security and governing law:
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- Preparation: assemble the pitch materials, financial plan, capitalization records, financing strategy and diligence data room.
- Investor outreach and negotiation: meet investors and agree the commercial and governance framework in a term sheet or letter of intent.
- Corporate authorization: have the board approve the proposed issuance; obtain stockholder approval when the charter, share authorization or transaction requires it.
- Diligence: give investors evidence about the company’s finances, ownership, contracts, people, technology, intellectual property, customers, compliance and liabilities.
- Definitive documents: turn the term sheet into binding investment, governance and disclosure agreements.
- Conditions precedent: resolve diligence findings, finish disclosure schedules, confirm authority and wire instructions, and complete required filings or charter actions.
- Closing: sign, transfer the subscription money, issue or transfer the securities, and update ownership and statutory records.
- Post-closing administration: deliver final copies, make required filings, begin investor reporting and operate the agreed governance rights.
A signed term sheet is therefore a framework for the transaction, not proof that the company has raised cash. Funds should be treated as available only after they have been received and the closing conditions have been met.
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1. Prepare the company before approaching investors
Preparation determines how quickly the later stages can move. The company should be able to explain how much capital it needs, what the money will fund, which security it proposes to issue and how the transaction affects ownership and control.
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Core materials to assemble
- Pitch deck and operating plan: market, product, traction, team, milestones and the specific use of proceeds.
- Financial plan: historical statements where available, a cash forecast, assumptions, hiring plan and runway under different scenarios.
- Capitalization records: a current cap table showing founders, employees, option grants, prior SAFEs or notes, warrants and any promised equity.
- Valuation framework: the proposed valuation or conversion mechanics, anticipated dilution and the ownership outcome under plausible financing sizes.
- Corporate records: formation documents, charter, bylaws, board minutes, stock ledgers and prior financing approvals.
- Data room: an organized, access-controlled collection of the documents investors will request during diligence.
Keeping the cap table and board records current is especially important. An undisclosed grant, missing stock issuance approval or inconsistent ownership spreadsheet can delay signing while counsel reconstructs the company’s history.
2. Negotiate the term sheet
The term sheet records the principal economics and governance points the parties intend to document. GOV.UK guidance identifies valuation, financing structure, board composition, option-pool treatment, fees and investor-consent or reserved-matters provisions as common subjects. “Pre-money valuation represents the company’s value before new capital is invested,” according to that guidance.
Economic points
- Amount to be invested and the proposed security.
- Pre-money or post-money valuation, price per share or SAFE valuation cap and discount.
- Liquidation preference and participation terms in a priced preferred-stock round.
- Option-pool size and whether the pool is increased before or after the investment.
- Pro-rata or participation rights in later rounds.
Control and process points
- Board seats, observer rights and any independent-director requirement.
- Voting rights, protective provisions and investor consent over reserved matters.
- Information and inspection rights.
- Founder vesting, transfer restrictions, right of first refusal and co-sale provisions.
- Exclusivity, confidentiality, expense reimbursement and other clauses that may be binding before the financing closes.
Most of the investment is not legally complete at term-sheet stage. The parties still need definitive documents, approvals and a closing. A term sheet can also expire, be withdrawn or fail to close if diligence exposes a material problem or the required approvals cannot be obtained.
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What the board approves
The board normally authorizes the financing and the company’s issuance of the proposed shares or contractual instrument. The approval should identify the security, principal terms, buyer or investor group, number of shares or maximum amount, signing officers and any related documents.
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For a SAFE, Y Combinator’s official documentation states: “Your startup’s board of directors must approve issuing SAFEs.” The same practical rule applies to other company-issued securities: the board must act under the company’s charter, bylaws and applicable corporate law.
When stockholder approval may be required
A priced round can require stockholder action in addition to board approval. Examples include amending the certificate of incorporation, increasing authorized shares, approving a new class or series of preferred stock, or taking an action that the charter or governing law reserves to stockholders. The exact threshold and notice requirements depend on the jurisdiction, charter and existing investor rights.
How to document the approvals
Counsel typically prepares board and stockholder written consents or meeting materials, together with the charter amendment and resolutions approving the transaction documents. The company should check quorum, voting thresholds, notice, conflict-of-interest rules and signature authority before circulating documents. Missing or improperly signed consents can prevent a legally effective closing even when the investor has already wired money.
4. Complete investor due diligence
Diligence tests whether the company’s representations are supported by records and identifies conditions that must be fixed or disclosed before investment. Investors may use a diligence checklist, a secure data room, management calls and specialist reviews.
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Typical diligence categories
- Finance: bank statements, historical financial statements, forecasts, debt, unpaid taxes, burn rate and commitments.
- Ownership and equity: cap table, stock certificates, option plans, grants, SAFEs, notes, warrants, side letters and prior approvals.
- Corporate: formation documents, charter, bylaws, board and stockholder minutes, good-standing records and subsidiary structure.
- Commercial: customer and supplier contracts, pricing, revenue concentration, termination rights and material disputes.
- People: employment and contractor agreements, invention-assignment terms, immigration matters, compensation and benefits.
- Technology and intellectual property: code ownership, licenses, patents, trademarks, open-source use, security controls and data practices.
- Compliance and disputes: privacy, regulatory obligations, litigation, investigations, insurance and other liabilities.
Findings can change the transaction. Counsel may request a missing invention-assignment agreement, correction of an option grant, repayment or disclosure of debt, a tax filing, a contract amendment or a specific indemnity. The investor may also make remediation a condition to closing.
5. Draft the definitive financing documents
SAFE financing
A SAFE is a short contract under which an investor provides money now for equity later. Y Combinator describes it as neither debt nor equity at the time of signing: it has no interest rate or maturity date and generally converts into preferred shares when a later priced financing occurs. The conversion, valuation cap, discount, pro-rata rights and any side letter control the eventual economics. The board still must authorize each issuance.
Convertible note
A note follows the same broad workflow but is debt until conversion or repayment. The documents must address principal, interest, maturity, conversion triggers, discount or cap, events of default and any security or subordination terms. A maturity date creates a deadline that a SAFE does not have, so the company must plan for an extension, repayment or conversion if a priced round has not occurred.
Priced preferred-stock round
A priced round usually has a larger document package because the investor receives shares immediately and negotiates ongoing rights. Common documents include:
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- Stock purchase or subscription agreement.
- Amended and restated certificate of incorporation creating or revising the preferred series.
- Investor-rights agreement covering information, registration or participation rights.
- Voting agreement covering board election and specified voting commitments.
- Right-of-first-refusal and co-sale agreement governing transfers.
- Management-rights letter in some venture transactions.
- Disclosure schedules listing exceptions to the company’s representations.
The exact package depends on the company’s jurisdiction, existing charter and investor requirements. A financing lawyer should reconcile the new documents with every prior side letter and security already outstanding.
6. Satisfy closing conditions
Before signing, the parties run a closing checklist. Conditions commonly include:
- Completion of diligence and resolution or disclosure of material findings.
- Final disclosure schedules and accurate representations as of the closing date.
- Board, stockholder and any required regulatory or charter approvals.
- Evidence that the company and each investor have authority to sign.
- Execution of ancillary agreements, including intellectual-property, voting or pro-rata documents.
- Confirmation of subscription amounts, bank details and verified wire instructions.
- Compliance with securities-law exemptions, notices and any filing obligations.
Investor consent or reserved-matters provisions can affect the company after closing. Typical examples include significant borrowing, an asset sale, a merger, a new security senior to the investor’s shares or an amendment to the charter. These rights should be understood before the board approves the round because they shape future operating flexibility.
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- Final documents are circulated: counsel confirms the agreed versions, signature blocks, exhibits and schedules.
- Authorized parties sign: the company, investors and relevant founders or stockholders execute the documents, often through electronic signatures.
- Funds are transferred: each investor sends the subscription money to the verified company account. Wire instructions should be confirmed through a trusted, separate channel to reduce fraud risk.
- Securities are issued or transferred: the company issues preferred shares or records the SAFE, note or other instrument as required by the agreement.
- Closing evidence is assembled: the company records the executed agreements, approvals, wire confirmations, stock ledger entries and updated cap table.
Closing is complete only when the agreed conditions, signatures and funding mechanics are satisfied. A signed document without received funds is not cash in the bank, and a wire without valid corporate authorization may create a serious legal and accounting problem.
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8. Post-closing work
After the close, the company should deliver countersigned copies and any legal opinions or certificates required by the agreements. It should update the stock ledger, capitalization table, board records and option-plan records; make required corporate, securities or tax filings; and store the final data room in a durable location.
Management must also implement the new relationship: provide periodic financial and operating information, schedule board or observer meetings, honor pro-rata procedures and seek investor consent for reserved matters. The financing should be reflected correctly in accounting and future fundraising materials so that the next diligence process starts with consistent records.
How the security changes the transaction
| Feature | SAFE | Convertible note | Priced preferred-stock round |
|---|---|---|---|
| What investors receive at signing | Contractual right to future shares | Debt instrument that may convert | Shares issued at an agreed price |
| Interest and maturity | No interest or maturity under the standard structure | Interest and maturity are negotiated terms | Not applicable as debt terms |
| Valuation mechanics | Usually a cap, discount or both; conversion occurs later | Cap, discount and conversion triggers; repayment risk at maturity | Price and ownership are set in the round |
| Governance package | Usually lighter, with rights set by the SAFE and side letters | Depends on the note and related agreements | Typically broader investor, voting, transfer and board rights |
| Typical documentation burden | Lower, but board approval and accurate cap-table tracking remain essential | Moderate, including debt and conversion provisions | Highest, often including charter and several ancillary agreements |
| Key planning issue | Future dilution and conversion outcome | Maturity, interest and conversion or repayment | Immediate dilution, valuation and ongoing control rights |
When comparing structures, evaluate dilution and valuation mechanics, transaction cost and speed, maturity or conversion risk, governance and consent rights, information and pro-rata rights, board impact and the company’s ability to raise its next round. No structure is universally best; the right choice depends on stage, jurisdiction, investor expectations and the company’s capitalization.
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Timelines are planning ranges, not guarantees. One 2026 industry guide estimates two to three weeks for a straightforward close and 30–60 days for a more typical transaction. A March 2026 guide gives a broader 30–90-day range, with approximately two to four weeks for SAFEs or notes and six to 12 weeks for later priced rounds.
| Scenario | Indicative period after term sheet | Why it varies |
|---|---|---|
| Clean, straightforward SAFE or note | About 2–4 weeks | Shorter documents and fewer charter or governance steps, assuming records are complete |
| Typical early-stage financing | About 30–60 days | Diligence, negotiation, multiple investors and closing coordination |
| Later priced preferred round | About 6–12 weeks; many rounds fall within 30–90 days | Charter work, stockholder approvals, extensive rights and more complex diligence |
Common causes of delay include an inaccurate cap table, missing intellectual-property assignments, unresolved tax or litigation issues, slow investor feedback, disagreement over the option pool, charter amendments, multiple closing dates and unverified wire instructions. A company can shorten the process by preparing the data room early, using a single source of truth for ownership, pre-clearing board availability and assigning an owner to every closing deliverable.
A practical closing checklist for founders
- Confirm the security, valuation or conversion terms and the intended amount.
- Reconcile the cap table to signed grants, prior instruments and the stock ledger.
- Open a complete data room and label current versions clearly.
- Identify every required board, stockholder, charter, regulatory and securities-law action.
- Review the term sheet for binding confidentiality, exclusivity and expense clauses.
- Ask counsel to map every term-sheet point to a definitive-document clause.
- Track diligence findings, owners and deadlines in a closing checklist.
- Confirm investor names, subscription amounts, authority and wire instructions independently.
- Do not spend or represent that funds are available until receipt is confirmed.
- Immediately after closing, update the cap table, stock ledger, board records, filings and investor-reporting calendar.
Legal and jurisdictional limits
The workflow above is a general framework, not a substitute for transaction counsel. Corporate approval thresholds, securities-law exemptions, tax treatment, filing duties, charter language and investor rights vary by jurisdiction, company form, security and transaction facts. Counsel should confirm the actual approval sequence, document set, disclosure standards and closing checklist before the company signs or accepts funds.
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