Some financing rounds close on one specific day. Meaning, all investors fund their full investment amounts on the same date. This is common when a round has a small number of investors who can coordinate with the startup on logistics (wires, signature pages, and final documents). As the number of investors increases, coordinating everyone for a single-day closing becomes increasingly difficult, if not impossible. Therefore, startups often rely on one or more additional closing.
What “initial closing” and “additional closing” mean
To make it easier to close a round with multiple investors, the documents can allow the company to hold multiple closings. The first closing is typically the initial closing, and any later closing is called additional closing.
How long is the additional closing period?
The deal documents usually set a final date by which the startup can hold any additional closings. This window is often referred to as the additional closing period. It commonly runs 30–90 days from the initial closing, although it can be longer (for example, 120 or even 180 days).
Why investors often push back on longer periods
Investors often dislike long additional closing periods because they can allow late-to-the-table investors to invest on the same terms as earlier investors: 30, 60, or even 90+ days later. The early investors may feel they later investors have a de-risked investment and shouldn’t get the same earlier price.
One more risk: optics and signaling
There’s also a behavioral risk: a longer additional closing period can tempt some investors to wait and see. The thinking is, “Why invest now if I can invest in a few months on the same terms?” Because optics and signaling matter, a very long period can also (fairly or not) suggest weaker demand—even when that’s not the reality. Of course, any investor considering this approach has to weigh it against the chance the round closes without them.
The wait-and-hedge approach is especially problematic because startups usually need the capital as soon as possible. If the company has already spent 6+ months fundraising before the initial closing, being pushed another 60–90 days can be brutal.
Ryan RobertsStartup Lawyer
Ryan Roberts is a startup lawyer at Roberts Zimmerman PLLC with more than two decades of experience advising startups and venture capital investors. He is the author of “Acceleration” and StartupLawyer.com.
