Founders celebrate term sheets. VCs know the real work — and the real risk — starts there.
I have been on both sides of this. As a founder raising three times and as an investor across 65+ deals, I have watched the post-term-sheet period destroy fundraises that looked locked. Roughly one in four signed term sheets never reaches a close. That number is higher in down markets and for first-time founders who don't know what's coming.
Here is what actually happens in the gap — and how to make sure your deal is in the 75-80% that close.
The Timeline Nobody Shows You
The average time from signed term sheet to money in the bank is not a week. It is rarely even a month. The realistic windows, by stage:
Low — minimal diligence, simple docs
Watch for: Investor ghosting after signing
Moderate — board setup, legal docs, cap table cleanup
Watch for: Co-investor delays, re-trading
High — full diligence, reps & warranties, detailed legal
Watch for: Market shifts, reference checks, IP issues
Very high — multiple counsel, regulatory review possible
Watch for: Everything. Deeply complex.
The Five Things That Kill Deals After Term Sheet
1. Re-Trading
In roughly 15-20% of deals, investors use the due diligence period to renegotiate terms they agreed to at signing. This happens most often when market conditions shift, when competitive deals emerge, or when diligence reveals something the investor can use as leverage. Re-trading is technically not illegal — term sheets are non-binding — but it is a signal about how someone will behave as a board member. If you encounter it, push back hard and document everything.
2. Cap Table Problems
The number-one diligence failure I see: cap tables that don't match reality. Missing co-founder equity agreements, vesting schedules set up incorrectly, option grants that were never properly authorized, convertible notes with buried MFN provisions — all of these surface in diligence and all of them can pause or kill a close. Audit your cap table before you start a raise, not after you sign a term sheet.
3. Syndicate Collapse
A lead investor who commits to filling the round rarely fills it alone. If they're bringing in co-investors, each of those relationships is another close that needs to happen. One institutional co-investor backing out can create a hole in the round that reshapes the entire deal — or kills it. Understand the full syndicate structure and who has actually committed versus who is "likely in" before you celebrate.
4. Reference Checks on You
VCs run 10-20 reference calls per founder before closing, and not just the ones you gave them. They call your former managers, co-workers, customers, and other investors who backed you — or explicitly chose not to. The question they're really asking: "Is there anything we don't know that would change our thesis?" Founders who have surprised investors before, had contentious co-founder splits, or have unresolved conflicts with prior employers are at real risk here.
5. Legal Delays and Cost Shock
Legal closes are expensive and slow. A priced seed round costs $15,000-$40,000 in legal fees. A Series A runs $40,000-$100,000 or more. Many founders don't budget for this, which means they're burning cash they hadn't planned to burn at the exact moment they're trying to close. Add in back-and-forth on representations and warranties, IP schedules, and disclosure documents, and the timeline stretches further than anyone expects.
How to Protect Your Close
- →
Get a data room ready before you send the first pitch
Cap table, corporate docs, financials, customer contracts, IP assignments. Diligence that takes 3 weeks because you're assembling docs is diligence that gives investors time to get cold feet.
- →
Negotiate a 30-day exclusivity window, not 60
Standard term sheets ask for 45-60 days of exclusivity. Push for 30. It creates urgency on both sides and limits your exposure to market shifts.
- →
Ask for a first close structure when possible
In larger rounds, negotiate the right to take an initial close on committed capital before the full round is assembled. This gets money in the bank and creates momentum.
- →
Keep one or two backup investors warm until the wire clears
Do not stop all investor conversations the moment you sign a term sheet. Signal you're off the market, but maintain one or two relationships you can reactivate quickly if the primary deal falls apart.
- →
Hire your lawyer before you have a term sheet
Scrambling to find startup counsel after you sign costs time and negotiating leverage. Build the relationship early — the best startup lawyers have waitlists.
The Psychological Game
The hardest part of the post-term-sheet period is not logistical — it is psychological. Founders are wired to celebrate the term sheet and mentally move on to building. The money feels guaranteed. The team gets excited. You might even tell customers and candidates that you've raised.
This is dangerous. Your behavior shifts in ways that signal to the investor that you think the deal is done — which reduces your leverage during the close. Investors can feel when a founder has mentally closed the deal. That is when re-trading happens.
The right posture: treat the period between term sheet and wire exactly like the period before the term sheet. Stay operationally focused, respond to diligence requests fast, maintain other optionality where you can, and don't announce until the money clears.
The term sheet is not the finish line.
The wire is the finish line. Everything else is still a negotiation — treat it that way.