How Fundraising Actually Works
From pitch deck to wire transfer — the fundraising process demystified
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GP Fundraising: Raising a Fund
GPs raise capital by pitching LPs — pension funds, endowments, family offices, and fund-of-funds. The process typically takes 12-18 months for first-time managers and involves creating a PPM (Private Placement Memorandum), building an LP data room, doing roadshows, and navigating multiple rounds of due diligence. Most emerging managers raise from high-net-worth individuals and small family offices before graduating to institutional LPs.
Founder Fundraising: Raising a Round
Founders raise capital through priced equity rounds (Seed, Series A, B, C, etc.) or convertible instruments (SAFEs, convertible notes). The process involves building a pitch deck, identifying target investors, taking meetings, negotiating term sheets, and completing legal documentation. A typical Series A process takes 3-6 months from first meeting to wire.
The Term Sheet
A term sheet is a non-binding document that outlines the key economics and governance terms of an investment. For founders, the most important terms are valuation (pre-money and post-money), liquidation preferences, board composition, and protective provisions. For GPs, the LPA equivalent covers management fees, carry, fund term, investment period, and key person provisions.
Closing the Round
After a term sheet is signed, lawyers draft definitive documents — the stock purchase agreement, investor rights agreement, and company charter amendments. This process takes 2-6 weeks. Once documents are signed and funds are wired, the round is 'closed.' Some rounds have a 'first close' and 'final close' to accommodate investors who need more time.