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 Minnesota Angel Investment Term Sheet is a document that outlines the terms and conditions of an angel investment in a startup or early-stage company in the state of Minnesota. It serves as a preliminary agreement between the investor (angel) and the entrepreneur, detailing the key terms of the investment and setting the framework for further negotiations and the final investment agreement. The term sheet includes various important provisions that help both parties understand and outline their rights and obligations. It typically covers areas such as the investment amount, valuation of the company, ownership percentage, board seats, governance, liquidation preferences, anti-dilution provisions, and rights of the investors. Different types of Minnesota Angel Investment Term Sheets may exist depending on the specific circumstances and agreements between the parties. Some common types include: 1. Equity Financing Term Sheet: This is the most common type of term sheet, outlining the terms of an angel investment in exchange for equity ownership in the company. It specifies the pre-money valuation and the percentage of ownership the investor will receive in return for their investment. 2. Convertible Note Term Sheet: In cases where the entrepreneur prefers to raise funds through convertible notes, this type of term sheet outlines the key terms of the loan, such as interest rate, maturity date, and conversion terms. It also includes details on the equity valuation and discount rate to be applied when converting the notes into equity in the future. 3. SAFE (Simple Agreement for Future Equity) Term Sheet: The SAFE term sheet is an alternative to convertible notes, which is becoming increasingly popular. It outlines the investment terms in a simpler and more standardized manner compared to convertible notes, making it easier and quicker to negotiate and finalize the deal. 4. Royalty-Based Financing Term Sheet: In some cases, angel investors may prefer to receive a portion of the company's revenue as a return on their investment rather than equity ownership. This type of term sheet outlines the terms and conditions of the royalty-based financing arrangement. It is important to note that the Minnesota Angel Investment Term Sheet serves as a starting point for negotiations between the investor and the entrepreneur. Once the key terms are agreed upon, a more detailed and comprehensive investment agreement is typically drafted to cover all legal and commercial aspects of the investment.
