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.
A Delaware Angel Investment Term Sheet is a legal document that outlines the key terms and conditions of an angel investment agreement between a startup company and an individual or group of angel investors based in Delaware. It serves as a preliminary agreement before drafting the final investment contract. The term sheet encompasses various important details that guide the investment process and protect the interests of both parties involved. These details typically include the amount of investment, the valuation of the startup, ownership percentage, liquidation preference, anti-dilution provisions, board seat allocation, voting rights, and exit strategies. The Delaware Angel Investment Term Sheet can be customized to suit the specific needs and preferences of the parties involved. However, there are generally three main types of term sheets: 1. Convertible Note Term Sheet: This type of term sheet is commonly used in early-stage investments where the investors provide funding in the form of a loan that converts into equity at a later stage. It outlines the interest rate, maturity date, conversion terms, and other relevant details. 2. Equity Financing Term Sheet: In this type of term sheet, the investors directly purchase equity in the startup. It lays out the investment amount, valuation, ownership percentage, voting rights, and other key terms related to equity investment. 3. SAFE (Simple Agreement for Future Equity) Term Sheet: SAFE is a relatively newer form of term sheet that provides a simpler and more streamlined approach to early-stage investments. It defers the valuation and determines the equity conversion at a later financing round or specific trigger event. The SAFE term sheet outlines the investment amount, valuation cap (if applicable), discount rate (if applicable), and other terms pertaining to the safe agreement. These term sheets provide clarity and transparency to both startup founders and angel investors regarding the investment process, helping to build a mutually beneficial relationship. They serve as a foundation for negotiation and subsequent drafting of the final investment agreement, ensuring that the interests of all parties involved are protected.
