Phase 9

Negotiate, close, and celebrate!

This phase requires a solid data room, a good lawyer and some time-consuming negotiations. But thanks to high investor interest you are well positioned to have the money on your account within 4-6 weeks. Celebrate!

Phase 9a

Intro: Prevent mistakes and keep costs down

You have enough investors to close the round, and the key terms are defined! Sounds as if it will be an easy walk now.

And you are right: Compared to the previous phases this should be a rather easy walk. However, there are still many nitty gritty things to agree on in the final contract – plus some substantial things such as warranties of founders that can lead to emotional discussions.

Here are a few things that are crucial to steer intelligently through this phase and close the round:

  • Good relationship with future investors: Make sure you are close to your future investors. Periodic calls – be it to enquire about something related to the contracts, your business or even personal – create trust and make it much easier to resolve contractual details during the process. It is crucial to keep investing into these relationships!
  • Managing your own lawyer: It should be a given that you are working with a great lawyer with solid startup experience (if not, read this). The clearer you are regarding your needs and the less you involve the lawyer in nitty gritty negotiations the lower your final bill.
  • Involvement of other lawyers: Ideally you agree with the new investors to only have one lawyer – this makes things much easier and cheaper. However, especially in later stage rounds there are typically other investors involved. Coordinate upfront who it will be, and explicitly agree with all new investors to keep costs down.
  • Take the lead: Do not let the lawyers take over the process. You should be controlling the process. While your lawyer may support you in the negotiation of specific points that are crucial for you, it should be you to define the key contents and agree over them with the new investors.
  • Keep it plain vanilla: Use standard contracts and keep to them as much as possible. You are not the first startup to do a financing round, and not the first one to do an anti-dilution clause or plan for an IPO. All that stuff has been defined thousands of times – and if you have both an experienced lawyer and experienced investors you will find standard solutions that are acceptable for both sides.
  • Be pragmatic: While investors and their lawyers can be stubborn, some founders can be even worse. The fear of losing certain control over the startup can be stressful – and this becomes very clear in this phase as you define the details. Relax: Slowly losing control is part of building a fast-growing tech company. Discuss with your lawyer what is standard and go for this.

Phase 9b

Work out a first version of the needed contracts

You will want to elaborate a draft of an investment agreement and an updated shareholder’s agreement as quickly as possible.

The Share Purchase Agreement (SPA, also called Subscription Agreement or Investment Agreement) typically defines the closing process, highlights representations and warranties (of founders, the startup and new investors), and describes what happens if any of these representations and warranties is infringed.

A solid Shareholders’ Agreement (SHA) should already be in place. However, in case of an equity round it needs to be updated. Ideally this is only a few small changes such as update of the cap table. Or it could be a complete overhaul of the document, where starting with a clean new version may be more straightforward than trying to update the existing version.

Have your lawyer work out a first version of both documents. Discuss the details and the potential points for discussion internally before going out to investors.

To do's

Phase 9c

Negotiation with investors

A solid SPA/SHA based on the jointly agreed terms should enable a smooth progress. Having said this, we have never seen contracts that are fully undisputed in this phase. The fact alone that the investor or her lawyer wants to show that they have read the documents will result in lots of redline.

One of the new investors will typically take the lead in negotiating these contracts. Having said this, others may want to be involved as well, or at least be updated about the progress. It is up to you (and your lawyer’s experience) to judge how to coordinate this. Make sure this point is aligned with each investor upfront: Getting back to material points at the very end is highly frustrating for all parties involved.

Investors have much more experience with deal terms than you have. So the best strategy if they get back with feedback is to listen, ask questions and understand their points, rather than negotiating. Consolidate all feedback and elaborate an updated version jointly with your lawyer – most probably accepting certain points and being firm with others.

It typically takes a few rounds until a final version is ready. Both sides will need to accept some clauses they dislike. But soon you will be in the same boat and refocus on business building. This is where 

To do's

Phase 9d

How should you deal with side letters?

You want every investor to sign exactly the same SPA and SHA. Try to prevent side letters.

But there are cases where an investor asks for specific changes or amendments. Here are two examples:

  1. A financial institution wants to invest but for compliance reasons needs you to sign a contract specifying that you will not do any business in blacklisted countries such as North Korea. While every investor wants you to comply with relevant rules and regulations, such a specific clause will most probably not be required by other investors.
  2. A strategic investor wants to invest but asks for a first right of refusal to partner in a specific business area. While this can be attractive, it could also limit your future business (and exit) options. So you will want to be very careful going for such a side letter.

The rule of thumb with side letters is as follows: If a side letter is not of disadvantage to any other investor and if you make it transparent for all current and new shareholders it should be ok to sign it. Discuss with your lawyer before doing anything and include side letters in the closing folder.

To do's

Phase 9e

Finalize due diligence

In some cases (confirmatory) DD has already been finished in the last phase, in others this takes up to the very last moment.

If the lead investor writes a DD report, you may want to share it with all investors. In any case you should download all documents of the data room on a data stick and archive 2-3 copies. One should be with the lawyer, one with your startup, and potentially one with the lead investor.

To do's

Phase 9f

Signing: Keep it all electronic, but be precise and transparent

Unless illegal in the jurisdiction of your legal headquarters, you should go for electronic signing. It is the 21st century – and similarly as due diligence is done in a virtual data room the handling of investment contracts should be done electronically.

While there are advanced solutions such as DocuSign, a signed pdf version of the final contracts should be good enough (as always to be checked with your lawyer). Make sure that you do not just send around an electronic version of the signature page (e.g., page 16 of the SHA) but an electronically signed version of the entire document, and that you do a solid version control in the footnote of all your legal documents.

Your lawyer should provide an electronic closing binder to each new and existing shareholder at the end of the fundraising round. This binder should contain all signed documents. Accuracy and full transparency are crucial – any shortcut or mistake can hurt incredibly in the next financing round or prevent an exit.

To do's

Phase 9g

Efficient management of cap table and ESOP

The static management of your cap table should be relatively simple. It can be done in an Excel spreadsheet as long as you don’t have a large number of shareholders. Make sure both your lawyer and you yourself are taking a deep look at the cap table; mistakes can be very costly or even lead to severe issues over time (in the worst case prevent an exit).

Handling an ESOP can be more complex, especially if it is a program that is not just created for top management but for a broad number of employees. Make sure you keep the full overview over signed documents, vesting and latest contact addresses (incl. of employees who left the company).

The fact that it is difficult to trade startup shares or options is another potential pain point. Several companies are addressing this and have created secondary markets for tech startups.

Here are a few interesting tools you may want to check out in case these are topics are of interest:

To do's

Phase 9h

Get the money into your account

While getting the money onto your account should only be a formality at this stage, it obviously has a big symbolic importance: Your fundraising has been successful!

There are a few technical things you need to be aware of. Some countries require to do the payment of an equity round via a special bank account – a so-called escrow account. The startup only gets access to the money once the financing round is documented in the country’s commercial registry. Opening such a special bank account can take some time.

Another potential pain point can be KYC and Anti-Money Laundering regulations. Big money transfers may trigger various processes at financial institutions that you have not been aware of. Talk to your lawyer and/or banker ahead of time to make sure these topics are under control.

To do's

Phase 9i


Many founders are bad at celebrating – always thinking ahead five steps and already deeply involved in new challenges now that the fundraising is working out.

But it is crucial to take a step back and celebrate. Not just for you and your co-founders, but for the entire team. Many of them may have been nervous during the process, probably without even telling you.

Here are a few things to consider:

  • Special, but cost-conscious: Having raised a big sum of money suggests to organize a nice party. The times that you bought cheap beers at the super market and cooked some pasta yourself should be over now. – … – NO!! Keep the low-cost spirit up – now more than ever. We will discuss this topic in detail in the next phase. But while you want to organize something special – having a few beers at the office would not be enough – it is crucial to keep the cost under control to prevent sending out the wrong signal.
  • Communication: You will want to do a short speech at the event. Describe the ups and downs of the fundraising phase. Maybe you have some funny anecdotes (there are typically many over the process of a fundraising round …). Mention that the money itself is not really that important – but that it does enable you to reach your vision!
  • Outlook: Mention that you are now fine-tuning strategy and OKRs for the coming 2-3 years. Tell them that they will all be involved in this process, and that you will get back over the coming weeks. (Note: We will discuss this in the next phase)
  • Celebrate! And don’t worry if a few team members come in late the next morning …

Review Phase 9

Take the following anonymous test to check whether you are ready to move on to the next phase:

How much money has been paid into your bank account so far?
Did you have to do any side letters?
Have you downloaded a copy of your data room?
Are you using a tool to manage your cap table and ESOP?
How likely are you to recommend this site to a friend? 1 = not likely at all, 10 = highly likely