Dear SaaStr: A VC Seems Interested. What Are the Odds a Deal Actually Happens?

Q: Dear SaaStr: A VC Seems Interested. What Are the Odds a Deal Happens?

So many founders get upset about VCs’ intentions, which is fair enough.

But nothing is signed until it’s signed.

Assume the probability of an investment happening isn’t 100% — until it closes:

  • If a VC doesn’t get back to you, even after what seems like a great meeting — send another email. If there’s no response after that, assume interest is 0% for now.  But that doesn’t mean forever.  If you want, send another update once you have another good month or two of progress under your belt.
  • If VC just seems interested, but you don’t see them pushing next steps, assume odds are 1%-5%
  • If a VC tells you they want to invest, but you don’t have clear terms or a term sheet, assume the odds are 5%-15%
  • If a VC sends you an unsigned / draft term sheet, and it’s super complicated and has a lot of blanks, assume the odds are 10%-15%
  • If a VC sends you an unsigned / draft term sheet, and it’s super and clean, with all terms agreed, assume the odds are 25%-50%
  • If a VC sends you a signed term sheet, but the terms aren’t 100% agreed, assume the odds are 25%-50%
  • If a VC sends you a signed term sheet that meets all agreed terms, assume the odds are 50%-90%.
  • If legal docs have gone out, assume the odds are 85%-95%
  • If the legal docs have been reviewed and come back with comments, assume the odds are 95%

So the more steps you get toward a close, the higher the odds a VC deal closes.

No matter how you might feel, hope, or think.

Remember fundraising is sales.  It’s selling stock.  And sales has a funnel.  It’s not Closed Won until it’s done.  And most deals have at least a somewhat lower probability than most optimistic VPs of Stock Selling (that’s you) thinks.

A related post here:

How a Venture Financing Can Implode Post-Term Sheet

Published on July 13, 2021

Pin It on Pinterest

Share This