Earlybird’s Investment Process – Earlybird’s view

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We are an international venture capital firm with offices in Berlin, Munich and Istanbul. Read more at www.earlybird.com, @EarlybirdVC
12 mins ago

Earlybird’s Investment Process

Since we deem transparency and openness among our core values, it is time to shed some light on the most central operational sequence of a VC: the Investment Process. Founders, that’s what you can expect when raising money from us:

Earlybird’s Investment Process — Overview.

The graphic inserted above presents a simplified overview of how the Earlybird investment process looks like on average. You will find both approximated timelines per stage as well as material and process descriptions that are central for the seamless collaboration between the teams and Earlybird. On the right hand you find a very high level overview of additional materials we might ask you for or short descriptions of the respective step. However, the concrete KPIs and further questions we might have are highly depending on how familiar we are with your market environment and business models.

Initial Call / Meeting

After having screened the documents you sent to us (usually it’s pitch deck, some traction data and a financial plan) we will schedule an initial call or meeting with the founders to get to know them personally and gain a more profound understanding of their company.

Partner Call / Meeting

In case the Associate or Analyst in charge is convinced that your company could become a very interesting investment opportunity we will schedule a short call with one or more of our partners to get their initial feedback as well. For each and every deal founders have one contact person on both partner and investment team level (Associate, Analyst).

Evaluation Process

Some of you might ask themselves what the exact differences between evaluation and due diligence are. Evaluation is more about understanding your business model, market environment, competitive landscape, timing, lock in effects, growth channels etc. — it’s kind of a high level research, mostly done from our side, where we might reach out to our industry expert network. It helps to answer the question of whether or not we want to invest into your business model. We will let you know immediately after the Investment Committee meeting.

Termsheet negotiations and signing

Next step is the termsheet — a 5 to 10 pages long document summarizing the most important commercial and legal terms of the deal, e.g. volume of the round, pre money valuation, liquidation preferences, drag along & tag along clauses, anti dilution protection, business guarantees, vesting schemes, information rights etc. We try to be as precise as possible in our termsheets in order to reduce time, effort and (legal) costs for the longform drafts (Shareholder’s Agreement, see below).

Due Diligence Process

The due diligence shall be confirming all parts of the material facts presented to us during evaluation. Only if some information significantly contradicts our earlier assumptions an investment decision might be reevaluated. This occurs very rarely given a comprehensible and diligent evaluation process.

Due Diligence usually encompasses organization & governance, employees & benefits, litigation & legal, finance and technology. Additionally, we have closer looks at customers, sales pipelines and marketing channels. For founders a due diligence process can be highly beneficial as well: it will provide very honest feedback on every aspect of your company and usually helps to identify, prioritize and work on the core challenges you might face.

Shareholder & Investment Agreement (longform)

Finally, the terms defined in the Term Sheet are reflected in the Shareholder’s and Investment Agreements, the so called longform. This last step of the investment process is mainly guided by highly specialized law firms investors and founders are cooperating with.

We are aware of the fact that for some of you it might be the very first round of venture funding and therefore consider it to be among our core responsibilities to share our knowledge and experiences with you and will guide you through the whole process.

Do you have questions or comments? Feel always free to reach out to us through twitter, facebook, LinkedIn or just comment below to start some interaction :-)

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    Earlybird Venture Capital

    We are an international venture capital firm with offices in Berlin, Munich and Istanbul. Read more at www.earlybird.com, @EarlybirdVC

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