recently rated:

Rated by 4

2.0 2.5 1.3 3.0 1.0

2.0

OrbiMed Advisors

 

$$$$$ New York, US East

top rated funds:

Rated by 16

3.8 4.5 4.0 3.8 4.2

4.0

Rincon Venture Partners

Certified

$$$$$ Santa Barbara, CA, US West

Rated by 16

4.2 4.1 3.7 4.2 3.6

4.0

Andreessen Horowitz

Certified

$$$$$ Menlo Park, US West

Rated by 43

3.6 3.8 4.2 4.2 3.8

3.9

True Ventures

Certified

$$$$$ Palo Alto, US West

Rated by 11

3.9 4.2 3.2 3.6 4.0

3.8

Mangrove Capital Partners

Certified

$$$$$ Luxembourg, Europe

Rated by 45

3.8 4.1 3.3 3.7 4.0

3.8

RRE Ventures

Certified

$$$$$ New York, US East

Rated by 107

4.7 3.8 3.7 3.1 3.6

3.8

Sequoia Capital

Certified

$$$$$ Menlo Park, US West

Rated by 33

3.9 3.8 3.8 3.4 4.1

3.8

Altos Ventures

Certified

$$$$$ Menlo Park, US West

Rated by 32

4.0 4.1 4.0 2.8 4.1

3.8

406 Ventures

Certified

$$$$$ Boston, US East

Rated by 64

3.9 3.8 3.8 3.4 3.9

3.7

First Round Capital

Certified

$$$$$ San Francisco, US West

Rated by 23

3.6 3.5 4.0 3.6 3.9

3.7

DFJ Mercury

Certified

$$$$$ Houston, US Central

Rated by 27

3.8 3.6 3.8 3.8 3.6

3.7

FLOODGATE

Certified

$$$$$ Palo Alto, US West

Rated by 11

4.0 3.8 3.9 2.9 3.8

3.7

Updata Partners

 

$$$$$ Red Bank, US East

Rated by 13

3.7 3.8 3.8 3.4 3.8

3.7

IDG Ventures SF

Certified

$$$$$ San Francisco, US West

Rated by 11

3.6 3.7 3.6 3.8 3.4

3.6

Flywheel Ventures

Certified

$$$$$ Santa Fe, US West

Rated by 19

3.7 3.6 3.8 3.5 3.5

3.6

August Capital

Certified

$$$$$ Menlo Park, US West

Rated by 64

3.8 3.5 3.4 3.5 3.9

3.6

Trinity Ventures

Certified

$$$$$ Menlo Park, US West

Rated by 15

2.9 3.6 3.8 3.3 3.8

3.5

Merus

 

$$$$$ US West

Rated by 21

3.5 3.6 3.6 3.2 3.4

3.5

Wellington Partners

Certified

$$$$$ Munich, Europe

Rated by 12

3.2 3.6 3.4 3.0 4.2

3.5

DN Capital

 

$$$$$ London, Europe

Rated by 30

3.3 3.4 3.3 3.7 3.7

3.5

Clearstone Venture Partners

Certified

$$$$$ Santa Monica, US West

Rated by 28

3.7 3.0 3.0 4.0 3.3

3.4

The Founders Fund

Certified

$$$$$ San Francisco, US West

Rated by 49

3.7 3.4 3.1 3.4 3.2

3.4

Menlo Ventures

 

$$$$$ Menlo Park, US West

Rated by 16

3.9 3.7 2.9 2.9 3.6

3.4

Versant Ventures

 

$$$$$ Menlo Park, US West

Rated by 10

3.6 3.4 3.9 2.7 3.3

3.4

DFJ Esprit

Certified

$$$$$ London, Europe

Rated by 13

3.0 3.8 3.5 3.2 3.4

3.4

Fidelity Growth Partners Europe

Certified

$$$$$ London, Europe

Rated by 16

3.9 3.6 3.1 2.9 3.5

3.4

GRP Partners

Certified

$$$$$ Los Angeles, US West

Rated by 61

3.8 3.3 3.0 3.5 3.4

3.4

New Enterprise Associates

Certified

$$$$$ Menlo Park, US West

Rated by 17

3.5 3.4 3.4 3.5 3.2

3.4

Scale Venture Partners

Certified

$$$$$ Foster City, US West

Rated by 39

3.4 3.4 2.9 3.4 3.5

3.3

Polaris Venture Partners

 

$$$$$ Waltham, US East

Rated by 28

3.4 3.4 3.4 2.8 3.3

3.3

Union Square Ventures

 

$$$$$ New York, US East

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You just signed a term sheet for your first round of venture capital. Congratulations! Now what"

While every fund has their own process and each deal works a bit differently, what you can expect between signing a term sheet and closing the round (to which I refer in aggregate as "diligence") basically falls into four buckets:

(1) Confirmatory due diligence. What this means is the investor is switching gears from "why should I do this deal"" mode to "why shouldn't I do this deal"" mode. There is a pretty standard set of items the investor will request. You can go to my blog and download the generic diligence request list that Softbank uses (http://tinyurl.com/4t5nud). Depending upon the stage of the company, there are usually a 100+ documents that need to be collected and delivered. I'm a big fan of using Microsoft Sharepoint to manage document delivery. In fact, I recommend using it to deliver documents from the beginning of the fund raising process. For example, when a VC asks for your "financial model" you should point them to Sharepoint instead of emailing the file. One benefit is you can check who's accessed the file and you can turn off access if they pass. For $40 per month you can buy a hosted version of Sharepoint.

(2) Syndication. For many deals, particularly the first institutional round, the full amount of the raise won't be spoken for. For example, if the raise is $8MM, the lead investor might be committed to $4-5MM. Syndication is the process of finding one or more additional investors to complete the round. If you had the good fortune of receiving multiple term sheets to begin with (and assuming you like one of the others) the easiest way to complete the syndicate is to invite those folks to participate on your newly signed term sheet. Failing that, you should reach out to the firms with whom you got close, but not all the way. The expectation is that the entrepreneur leads and directs the syndication process. The good news is that having a signed term sheet (hopefully from a reputable firm) makes it a lot easier than getting the term sheet to begin with.

(3) Documentation. Generating about 2-inches of legal agreements codifying the investment. Usually company counsel will take the lead on drafting documents; although it's not unheard of for the lead investor to do the first draft. You should ask that the syndicate use one law firm, but if they insist on each using there own, plan on the process taking a week or two longer than it would otherwise.

(4) Closing. Signing the paperwork and wiring the money. Yeah! It used to be that closings were held in person at some attorney's office (at least that was my experience early in my career) but today that almost never happens. The closing is usually held over a couple of days after everything has been agreed and then they sign and fax their signature pages to company counsel. Depending upon how many signatures, it can take a few days to complete.

A venture capitalist told me today that he passes on a number of investments because of bad references. He mentioned a specific instance where a former employer thought the manager in question was "a criminal" and another case where he learned that the group of founders were "fighting among themselves" to see who would run the company. In addition, the venture capitalist went on to say that in such cases, venture funds generally "just pass" without giving a good reason, since it is difficult to explain the reference context without giving away confidences.

This brings up a very important point that I have learned from personal experience: venture capitalists do both soft and hard references, and these references will haunt you one way or another. The "hard references" are the ones that you provide. The "soft references," which can include dozens of individuals, are people within your industry, potentially competitors, that they call in an off the "record format." In some cases, the calls you get from associates trying to learn about your business may be an industry research or reference call in disguise. So, what can you do" Members, read on...

Prior to accepting capitla from any fund that will require board representation, one should be sure to spend some time doing background checks on the new boardmember(s). Find out what industry they came from (finance, technology, consulting etc.), check out the quality of their other portfolio investments, and be sure to interview CEO's of those portfolio companies to find out how the investor has contributed (or not) to the BOD. Chances are that you will be stuck with your boardmembers for some time, and it's good to know who you are getting into bed with prior to making any decisions.