What US VCs Do Before Issuing a Term Sheet

TL;DR

• Before a term sheet, the deal champion usually has to build internal conviction inside the fund.
• Partner meetings, market checks, customer references, metrics review and financial analysis can all happen before terms.
• Different funds sequence diligence differently, so founders should ask directly about the investor's decision process.
• The most useful founder question is: what needs to happen internally for this to reach a decision?

The internal VC process founders rarely see

A founder experiences meetings and follow-up. Inside the fund, the investor may be writing an investment case, testing assumptions with partners, checking references and preparing for an investment-committee decision. Understanding that process helps founders supply the right evidence at the right time.

Step-by-step workflow

1. Initial sponsor forms a view

An investor develops enough conviction to keep spending time on the opportunity.

2. Partner or team exposure

The company is introduced to more decision-makers inside the fund.

3. Evidence gathering

The fund checks metrics, product, market, customers, competition and team references.

4. Internal debate

Partners test the upside case and identify reasons the investment could fail.

5. Terms decision

If conviction is sufficient, the fund decides whether to propose terms and what economics or governance it wants.

6. Confirmatory work continues

Some legal and company diligence may continue after a term sheet.

Documents and evidence to prepare

• Pitch deck and clear round summary.
• KPI definitions and source data.
• Financial model.
• Reference contacts when appropriate.
• Cap table and major financing history.
• Selected investor-room evidence.

Related SendNow resource: investor readiness data room.

Common mistakes

• Assuming one excited partner means the fund has approved the deal.
• Not asking how the fund makes investment decisions.
• Sending new numbers that conflict with the deck.
• Waiting for a term sheet before preparing the room.

External reference: Y Combinator fundraising resources. This article is educational, not legal or tax advice.

See the VDR and Microsite workflow

Frequently asked questions

Does every VC use an investment committee?

No. Fund decision processes vary significantly.

Can a term sheet come before full legal diligence?

Yes. Business conviction can precede deeper confirmatory legal review.

What should I ask after a strong meeting?

Ask what the investor's internal next step is, what evidence is still missing and who else needs to become comfortable with the deal.

Keep the financing process organized

Use SendNow Microsites for the multi-file investor stage while qualified counsel handles the legal structure.