Q: Dear SaaStr: A VC Seems Interested. What Are the Odds a Deal Happens?
"he said they were really interested" is not a termsheet
"they want to preempt but just need to see a deck & discuss it" is not a termsheet
"it was a great call & she said they def want to know when we raise" is not a termsheet
only a termsheet is a termsheet
— 👨🏻💻☕️ (@hunterwalk) July 14, 2021
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: