Term Sheet Template For Angel Investment

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What is term sheet template for angel investment?

A term sheet template for angel investment is a document that outlines the key terms and conditions of an investment agreement between an angel investor and a startup. It serves as a guide to facilitate negotiations and defines the basic terms, such as the amount of investment, equity ownership, liquidation preferences, anti-dilution rights, and more.

What are the types of term sheet template for angel investment?

There are several types of term sheet templates for angel investment, including:

Convertible Note Term Sheet: This type of term sheet is used when the investment is structured as a convertible note, which is a debt instrument that can convert into equity at a future date.

Equity Term Sheet: This template is used when the investment is made in exchange for equity ownership in the startup.

SAFE (Simple Agreement for Future Equity) Term Sheet: SAFE is an alternative to convertible notes and provides a right to the investor to obtain equity in the future, without setting a valuation at the time of investment.

How to complete term sheet template for angel investment

Completing a term sheet template for angel investment involves the following steps:

01

Fill in the details of the startup, such as its legal name, address, and contact information.

02

Specify the amount of investment proposed by the angel investor.

03

Define the pre-money valuation and the percentage of equity ownership offered in exchange for the investment.

04

Include any special rights or preferences, such as liquidation preferences or anti-dilution rights.

05

Agree on the terms related to governance, board representation, and decision-making processes.

06

Clearly outline the conditions of the investment, including any milestones or requirements that need to be met.

07

Address any intellectual property rights, confidentiality agreements, or non-compete clauses.

08

Review and finalize the document with all parties involved, seeking legal advice if necessary.

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Questions & answers

What is an investment term sheet?

A term sheet is a nonbinding agreement outlining the basic terms and conditions under which an investment will be made. Term sheets are most often associated with start-ups. Entrepreneurs find that this document is crucial to attracting investors, such as venture capitalists (VC) with capital to fund enterprises.

Who prepares term sheet?

A term sheet is a relatively short document that an investor prepares for presentation to the company in which the investor states the investment that he is willing to make in the company. This document is usually 5-8 pages in length.

What are the terms of an angel investor?

An angel investor is someone who invests their own money in a small business in exchange for a minority stake (usually between 10% and 25%). Angel investors tend to be entrepreneurs or people with extensive experience in the business world.

How does an angel investment work?

Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own net worth.

What should be included in a term sheet?

But no matter who the investor is, a term sheet will always contain six key components, including: A valuation. An estimate of what a company is worth as an investment opportunity. Securities being issued. Board rights. Investor protections. Dealing with shares. Miscellaneous provisions.

How do you make an investment term sheet?

How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.