How to Manage a Competitive Fundraising Process
You did everything right, and now you have multiple term sheets. So how do you get the best deal with the right partner without damaging relationships or derailing the process?
Having a competitive fundraising round is a great position to be in, but it still comes with challenges. I’ve seen founders navigate this successfully, but I’ve also seen situations where:
A founder burns relationships by mishandling negotiations
A deal falls apart because the process drags on too long
The founder gets focused on valuation, and chooses the wrong partner
Here’s how to manage the process strategically, efficiently, and professionally to maximize outcomes for your company.
Define What You Want
You’re in the driver’s seat, but where do you want to go? Before you engage further, sit down with your co-founders, current investors, and key stakeholders to align on these three scenarios:
Minimum Offer (The Deal You’ll Take if Needed)
A good deal, but not a great deal
The terms are fair, and you won’t regret it a year from now
This becomes your baseline leverage
Ideal Offer (The Deal You’re Targeting)
A great deal that excites you
You’ll still feel good about it in a year
This is the outcome you’ll push towards in negotiations
Walkoff Offer (The Deal That Ends the Process Immediately)
An amazing (borderline unreasonable) deal with your preferred partner(s)
The offer is so compelling that you’d take it on the spot
Not the absolute max you could negotiate, but a shortcut to an incredible outcome
Not every investor should have an “ideal” or “walkoff” scenario. If a firm can’t even meet your minimum, cut them out quickly.
Secure a BATNA
Now that you know your minimum offer, go secure it. Work with interested investors to lock in at least one term sheet at or above your minimum.
This becomes your BATNA (Best Alternative to a Negotiated Agreement), a powerful form of leverage. You now have a limited window to negotiate towards your ideal or walkoff offer before momentum fades. Remember that time kills all deals so move quickly.
Thin the Herd
With your BATNA in hand, start circling back with interested investors and push for better terms. As offers improve:
Raise your minimum offer: new term sheets should be better than your last BATNA
Pass on weaker offers quickly: don’t string investors along
Keep the process moving: don’t let the process drag
Your goal is to get each investor’s best and final offer as quickly as possible while keeping the process professional.
The Walkoff
If you have strong interest, you can test the waters for a walkoff offer. Follow these steps:
Approach your top choice for partner first and say: "If you can offer X, we will immediately sign and move forward with you."
If they say no, get their best counteroffer, then approach the next firm on your list
If they say yes, you’re done
Why limit this to one investor at a time?
The whole point of a walkoff offer is that you’re signaling exclusivity. If you use it on multiple firms at once, you risk damaging trust with all of them. This is the same as taking a pre-emptive offer before even starting a fundraise process.
Investors Are People Too
A competitive process should not feel transactional. Investors don’t want to feel like just another bid, they want to feel like you chose them for reasons beyond just numbers. Some key tips to avoid burning bridges:
Take a personal approach to each partner and build the relationship
Don’t just negotiate on valuation, talk about long-term partnership fit
If you know you won’t accept an offer, be transparent and exit quickly
If you decide to pass on an investor, thank them and keep the door open
Be Honest
The quickest way to destroy a deal is to lie, bluff, or over-embellish. If an investor catches you misleading them, it can derail your entire process.
Communicate clearly, frequently, and professionally
Keep your word, don’t play investors against each other unfairly
Don’t share confidential details about other offers. It is unethical and it will backfire
Your reputation follows you. A poorly managed process will hurt you beyond this round!
Final Thoughts
A competitive fundraising process is an incredible position to be in. But success isn’t just about getting the highest valuation, it is about getting the right deal with the right partner so you can get back to building. The investor community is small, and your reputation matters. While it might feel like you are negotiating against all these other partners you eventually want to be excited about working together. If you can navigate all this well, you will get great terms and find partners that you will enjoy working with for many years to come.