What Happens After a VC Term Sheet — The Complete Post-Term Sheet Guide

You've signed a term sheet. The hard work of getting here is done. But there are 4–6 more weeks of work between the term sheet and money in your bank account — and several things that can still go wrong.

Here's exactly what happens between term sheet and close.

Step 1: No-Shop Period Begins (Day 0–1)

Most term sheets include a no-shop clause: you agree not to solicit or negotiate with other investors for a fixed period (typically 30–45 days). The no-shop is legally binding even when the rest of the term sheet is not.

Implication: once you sign the term sheet, stop active fundraising conversations with other funds. You can maintain existing conversations on a follow-up basis, but actively soliciting new leads violates the no-shop.

Step 2: Legal Preparation Begins (Days 1–5)

Your lawyer and the investor's lawyer start preparing the full legal documentation:

• Stock Purchase Agreement (SPA): The primary document transferring shares
• Investor Rights Agreement (IRA): Establishes investor rights post-close (board seats, information rights, pro-rata, registration rights)
• Right of First Refusal and Co-Sale Agreement (ROFR/Co-Sale): Governs future share transfers
• Voting Agreement: Establishes voting rights on key decisions
• Certificate of Incorporation amendment: Authorizes the new preferred shares

This is why having a startup lawyer on retainer before you fundraise matters. A lawyer who's done 100 VC closings moves much faster than one doing their first.

Step 3: Due Diligence Continues (Weeks 1–3)

Signing the term sheet does not end diligence — it intensifies it. Now the investor is doing the detailed review that justifies writing the check:

Financial diligence:

• Detailed review of your P&L, ARR build, and unit economics
• Bank statements to verify cash position
• Cap table review for accuracy and cleanliness

Legal diligence:

• IP assignments — do all founders and key employees have signed agreements assigning IP to the company?
• Employment agreements — are key employees properly employed with no competing obligations?
• Material contracts — customer contracts, vendor agreements, leases
• Any outstanding litigation or regulatory matters

Reference checks:

• Customer references (6–12 calls)
• Prior investor references
• Professional references on founders

Technical diligence (if applicable):

• Code review
• Architecture review
• Technical debt assessment

Step 4: Filling the Round (Weeks 1–2)

If your lead investor is not filling the entire round, you need to close the remaining allocations from co-investors. This happens after the term sheet is signed and the no-shop is active.

Who fills the remaining allocation:

• Existing investors (angels, seed funds) exercising pro-rata
• New co-investors the lead brings in
• Strategic investors (customer VCs, corporate VCs)
• Family offices and HNW individuals

Have your fill list ready before you sign the term sheet. Knowing who will fill the round in advance compresses this phase.

Step 5: Legal Negotiation (Weeks 2–3)

Lawyers negotiate the final legal documents based on the agreed term sheet. Most terms are standard; the negotiations typically focus on:

• Specific protective provisions
• Board composition details
• Information rights scope
• Any investor-specific side letters

This is where having a good startup lawyer matters most. A lawyer who knows what's market in VC deals won't waste time on non-issues.

Step 6: Closing and Funding (Weeks 3–4)

All parties sign. The investor wires funds. Your bank account updates.

Post-close administrative tasks:

• Update Carta (or your cap table tool) with the new shares
• File required state and federal notices (your lawyer handles this)
• Send a closing announcement to your team and existing investors
• Update your data room with the new cap table

What Can Still Go Wrong After a Term Sheet

Diligence reveals a problem. IP not assigned, a messy cap table, a customer reference that's negative, or financials that don't match the pitch. Preventable with good preparation.

Lead investor loses conviction. Rare but real. Market conditions change, a partner leaves, or something in diligence shifts the calculus. If this happens, you're back to fundraising during your no-shop period — which is contractually constrained.

Legal takes too long. An experienced startup lawyer prevents this. Inexperienced lawyers on either side can extend the close by weeks.

Round doesn't fill. If your lead is only writing $3M of your $5M round and you can't find co-investors, you may need to close on less than your target amount or delay closing. Have your co-investor list ready.

A Faster Path to the Term Sheet

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