Entrepreneurs in the due diligence phase are often eager to know when they will receive a term sheet. Unfortunately, the due diligence process varies by venture firm, making the timing a bit variable. However, despite the variance in process there are some common signs that the term sheet will be coming soon.

First and foremost, the best way to know that a term sheet will be offered soon is when your contact at the venture fund tells you. Good VCs are sensitive to your situation as an entrepreneur will provide you with some transparency as to where you are in the process, openly communicating the next steps for due diligence and the likely timing. However, communication is stylistic and not all VCs will be forthcoming. In these situations it’s okay to ask VCs about their process and expected timing.

However, in the event that the VC does not communicate about the process, there are a few other common signs that the due diligence process is coming to a close:

• You Meet All Of The Other Partners at One Meeting: While one partner will often spearhead due diligence on your company, most VC firms require some level of partnership approval for each investment. As a result, when the due diligence process is coming to a close and the lead partner is getting close to wanting to make an investment, they will often invite you in to meet with the entire partnership so that the entire group can have some sense of you and your company. This will enable them to vote on the investment in your company. Ultimately, when you are invited to meet the partnership, the term sheet is probably not far away.
• VCs Start Talking Terms: Also, when VCs start talking about specific terms, including your current capitalization, shareholder expectations and other drivers that factor into the development of the term sheet, they are likely starting to develop a proposed term sheet and post-money (post-investment) cap table. Creating a term sheet and cap table is often one of the last steps before creating a term sheet and is usually a good sign that an offer will be made soon.

Note that being close to receiving a term sheet doesn’t mean that you will get one. As I mentioned in my post, Why VCs Conduct Due Diligence, VCs can discover ‘deal killing’ information at any point before the investment is made. While these signs are reason to be optimistic about receiving a term sheet, it’s wise to remain cautiously optimistic.