California Angel Fund Promissory Note Term Sheet

• Category: Small Business - Investment or Funding
• State: Multi-State
• Control #: US-ENTREP-004-2
• Format: Word; Rich Text

Description

"An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. New start-up companies often turn to the private equity market for seed money because the formal equity market is reluctant to fund risky undertakings. In addition to their willingness to invest in a start-up, angel investors may bring other assets to the partnership. They are often a source of encouragement; they may be mentors in how best to guide a new business through the start-up phase and they are often willing to do this while staying out of the day-to-day management of the business.
Term sheet is a non-binding agreement setting forth the basic terms and conditions under which an investment will be made."

The California Angel Fund Promissory Note Term Sheet is a legal document that outlines the terms and conditions associated with an investment made by angel investors in California. This term sheet serves as a preliminary agreement between the investors and the startup or business seeking funding. It highlights the key provisions and expectations concisely, often preceding the negotiation of a more comprehensive formal agreement. Key elements typically included in a California Angel Fund Promissory Note Term Sheet are: 1. Investment Details: This section outlines the amount of money being invested in the company by the angel investors, along with any specific conditions or milestones associated with the funding. 2. Interest Rate: The term sheet specifies the applicable interest rate that will be applied to the investment, determining the return the investors will receive on their investment. 3. Maturity Date: This determines the date by which the business must repay the investment. It is crucial to clearly define the timeline for repayment to avoid any misunderstandings. 4. Conversion Rights: If the promissory note can be converted into equity in the future, this term states the conditions under which conversion can occur, such as a specific funding round or a trigger event. 5. Security: In some cases, the promissory note may be secured by the business's assets to provide additional protection for the investors in case of default or bankruptcy. Different types of California Angel Fund Promissory Note Term Sheets may vary based on specific requirements and situations. Some variations include: 1. Convertible Promissory Note Term Sheet: This term sheet outlines the provisions related to convertible notes, which allow the investors to convert their debt into equity at a predetermined valuation or conversion ratio. 2. Secured Promissory Note Term Sheet: In situations where the investors require additional security for their investment, this term sheet may include clauses specifying the collateral or assets that would secure the promissory note. 3. Simple Promissory Note Term Sheet: This type of term sheet may highlight the basic terms without converting into equity, placing the emphasis on repayment conditions within a specified timeline. 4. Participating Promissory Note Term Sheet: In this case, the term sheet may include provisions granting the investors the right to participate in future equity rounds, allowing them to receive both their principal and a share of future gains. Overall, the California Angel Fund Promissory Note Term Sheet serves as a crucial starting point for negotiations between angel investors and businesses seeking investment, providing a framework for the subsequent legal agreement and ensuring clarity and understanding between both parties.