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Process letter (Phase I and Phase II)

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Quick Answer

A process letter is the instruction sheet a sell-side advisor issues to bidders setting out what to submit, in what form, and by when.1

What it is

A broad auction typically issues two — a Phase I letter calling for indications of interest, and a Phase II letter calling for final bids, often with a mark-up of a draft purchase agreement attached. A targeted process may issue one or none. The letter is how the seller keeps bids comparable, and in a competitive auction the sensible move for a bidder is to draft its letter of intent against exactly what the process letter demands.1

Operational context

What good looks like

Why It Matters

The process letter is the clearest signal of which archetype is actually running. Two formal rounds with attached mark-ups is an auction; a phone call and a deadline is not.1

Frequently Asked Questions

What is Process letter (Phase I and Phase II) in venture capital?

A broad auction typically issues two — a Phase I letter calling for indications of interest, and a Phase II letter calling for final bids, often with a mark-up of a draft purchase agreement attached. A targeted process may issue one or none.

Why is Process letter (Phase I and Phase II) important for startups?

Understanding Process letter (Phase I and Phase II) is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.T3-29 — Goodwin ProcterCrafting a Competitive LOI (May 2025)Goodwin Procter(A process letter is the instruction sheet a sell-side advisor issues to bidders setting out what to submit, in what form, and by when.)secondary · T3 · sell-side-process · document

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