We may be in the midst of a bumper year for healthcare financing, but any number of factors can throw a funding round off course. TechCrunch just posted a list of why deals can fall apart, and why a VC can pull a term sheet. It’s written by Jason Lemkin, managing director at Storm Ventures. Here are the highlights:
- Failing to hit goals as promised: During the funding process, it’s key to hit internal financial goals. If you tell a VC you’ll have $250,000 in revenue for a month, then fail to hit that mark – well, “this suggests any number of other undisclosed issues if you can’t even hit the projection you gave me two weeks ago.”
- Keep term sheets venture-friendly: If a startup can buy out the investors for just 1X before the next round, a VC will likely bail. “Up to a point, everything can be negotiated,” Lemkin said. “But if you seem to hard to deal with, if you push it too far – VCs will walk.”
presented by
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
- Issues with management: While problems with startup leadership is common, it’s better to let VCs know who the difficult players are. “Identify the weaknesses on your team upfront,” Lemkin said. “It’s OK – if you plan to make upgrades. If you don’t see these weaknesses though, that’s a red flag.”
- Poor investor syndicate: You have to let the VCs know who they’re investing with. “Finding out at the 11th hour that the rest of the syndicate is unlikely to write another check can spook VCs,” Lemkin said.
