Overview of Deal Stages

An article we liked from Thought Leaders Hambleton Lord & Christopher Mirabile of Seraf:

One Step At a Time: Overview of Deal Stages

Since I am part of a team that runs a very active angel network, most of the time, I am juggling a bunch of deals in different stages of completion. It can be hard to keep track of where everything stands. Obviously, regularly updated lists and status reviews are helpful, but even more helpful is an overall sense of each of the stages in the process. In particular it helps to know which stages are critical junctures and key turning points in the life of a deal. That way as deals make progress and are approaching those points, you can jump in proactively and help guide them along.

So what are these stages and how should a deal lead think about the overall process? As we have pointed out in our articles on diligence, we like to progress diligence in logical, sequential stages in order to conserve time and effort - that of the entrepreneur as well as the investors. It doesn’t make sense to put a ton of work into an effort if you have no likelihood of investing. So a process designed with checkpoints along the way is the best approach.

A good basic process will include the following stages:

Initial Pitch Meeting
Deep Dive Meeting
Due Diligence Phase & Goal Alignment
Negotiation of Terms
Solicitation of Soft-Circles
Syndication
First Closing

Let’s have Christopher take us through a closer look at each of these stages at an overview level.

Christopher, how do initial meetings work? Are you talking about screening, or a formal pitch?

Pitching companies typically are introduced to the investors by a trusted source and then selected and invited to pitch as a result of making it through some form of screening process. Active early stage investors will look at anywhere from 50-100 companies for each company they actually invest in. Angels invest in a lot of companies, but say no to the significant majority of companies they speak with.

Screening is typically done by a committee or subset of the investors in a network. The companies which make it through screening will typically progress to a pitch in front of the full group or network. These pitches are almost always relatively short in duration - somewhere between...