I like the practice of VCs giving term sheets that provide for a specific size for the total round and then stating how much the specific VC will contribute.  For example, “VC will serve as the lead investor up to $400,000; Company would source balance of the round up to $600,000 (so round size would be up to $1,000,000 in the aggregate).”

At the early stage, the founding team often has lots of “interest” lined up waiting for a lead.  I hear this often.  Well, the structure described above solves that problem.  And it also puts the founding team to the task – VC stepped up to lead so now go and fill out the round!

From my perspective this serves as a test for the founding team; and it is an important test.  It serves to validate their claim about having enough interest to fill out the round and also proves their ability to get that done.  Even after the lead investor steps up and provides a term sheet, getting remaining hard commitments is incredibly challenging and can take weeks or even months!

Another interesting point about making it clear that the founders (or subsequent management team) need to fill out the round is that it sets a tone for going forward fund raising responsibility.  I love to help our portfolio companies raise investment capital, but the buck stops with the management team – it is the team’s responsibility to raise capital.  Sometimes it seems that this responsibility never stops.  I like reinforcing from the earliest interaction that the management team (might be the founding team) of a VC backed company can never delegate the fund raising responsibility.  We (the VCs) can help, but the effort will fail if not led by the team.

Go raise some bucks!