There's a very good post on venture hacks today on how to close a term sheet quickly. I agree with two-and-a-half of the three hacks1 and want to add a fourth that I think deserves a spot on the summary list:
4. Have all due diligence ready to go on demand
Due diligence on demand means that the company's due diligence is always current, up-to-date, and ready to be delivered to a potential partner, investor or acquiror at a moment's notice.
Given that financing and acquisitions are rare (once a year), this may seem like overkill. But it actually demands that the company keep its books current and in perfect order, which has a number of other associated and equally important benefits.
At Visible Path, we documented our business operations from day one around a typical due diligence checklist that a public company might use when acquiring another public company. The index has 14 sections and 100+ subsections that include corporate governance, stockholder information, securities agreements, material contracts, product and mfg information, government regulations, litigation and audit information, employee information, employee benefit information, financial information, marketing information, property, employee benefit plan matters, facilities. With thanks to Peter Astiz of DLA Piper (who helped me create the original document) and Neal Williams of Carr & Ferrell (who used it to manage our financings and transactions), I've appended the actual document below:
The week we incorporated, we only had a handful of documents in these binders: our Certificate of Incorporation, our Bylaws, our founders Employment Agreements, and a cap table describing the ownership of the company. A few documents and about 100 empty tabs. These empty binders seemed a bit silly when we started but as we ran the business - hired employees, filed trademarks, signed up partners, each relevant document was filed in the appropriate section as it occurred, and the binders quickly filled out.