How To Handle Soft Commitments

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Investors provide soft commitments to hold their place in a fundraise but delay the actual investment.

The soft commitment is not legally binding.

Investors often provide soft commitments while they go through their own diligence process.

It's often the case that the investor drops out before making the investment.

Here are some steps the founder can take to close a soft commitment:

Make it clear other investors are joining the round now by listing their investments.

Calculate in dollars the interest and committed funds and share the results with soft commitment investors.

Update this number weekly and show how the raise is reaching completion.

Baby-step the investor through the process of interest, term sheet signing, and diligence.

As the investor invests more time into the deal, they become more committed because their time is in it.

If there are several soft commitments, then combine them into one fundraise and put a price on the round that most agree with.

This treats the multiple soft commitments as a lead investor.

Consider these steps in managing soft commitments for your fundraise.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

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