"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."
Puerto Rico Angel Fund Promissory Note Term Sheet
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A venture capital term sheet is the blueprint for an investment. Although term sheets have a set of formalized components, terms are generally undefined. The parties involved may have different understandings of what the terms mean.
Common provisions of a convertible debt financing include: The interest rate. Usually somewhere between 4% and 8%. The maturity date. Usually 12?24 months. A mandatory conversion paragraph. ... An optional conversion paragraph. ... A change of control provision. ... A conversion discount. ... A valuation cap. ... An amendment provision.
4 Steps to Create a Term Sheet Investment amount. Timing. Company valuation. Form of investment. Stock option plans. Parties' rights and responsibilities. Board representation. Time frame for deal completion.
Founders who receive a term sheet need to understand, from a legal perspective, how to manage the process. Key provisions of a VC term sheet include: investment structure, key economic terms, shareholder agreements, due diligence, exclusivity and closing.
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.
Term sheet examples: What's included? Along with setting the valuation for the company, a term sheet details the amount of the investment and detailed terms around the calculations of pricing for the preferred shares the investor will receive for their money. A term sheet also establishes the investor's rights.
A term sheet is usually a non-binding agreement outlining the basic terms and conditions of the investment. It serves as a template for the convertible note for both parties.