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 Virginia Angel Investment Term Sheet is a legally binding agreement that outlines the terms and conditions under which an angel investor will provide funding to a startup or early-stage company located in the state of Virginia. This document serves as a preliminary agreement before the finalization of a more comprehensive and detailed investment contract. Some key elements covered in a Virginia Angel Investment Term Sheet include: 1. Investment Amount: This specifies the total amount of funding the angel investor intends to provide to the company. It may be a lump sum or disbursed in stages, depending on the agreed-upon investment structure. 2. Valuation: The term sheet establishes the pre-money valuation of the company, which determines the percentage of ownership the angel investor will receive in exchange for their investment. 3. Security: It defines the type of security the angel investor will receive in return for the investment. This could be in the form of convertible notes, preferred stock, or other financial instruments, ensuring that the investor's interests are protected. 4. Board Representation: If the angel investor desires to actively participate in the company's decision-making, the term sheet may outline the number of seats the investor is entitled to on the company’s board of directors. 5. Liquidation Preference: This clause determines how the invested capital will be distributed in the event of an exit, such as an acquisition or IPO. Liquidation preference ensures that the angel investor recoups their investment before other shareholders receive any proceeds. 6. Anti-dilution Protection: This provision safeguards the angel investor's ownership percentage by adjusting the conversion ratio of their securities in case of subsequent financing rounds at lower valuations. 7. Vesting and Lock-up Periods: It is common for equity agreements to include vesting schedules that outline the time period during which founders, and potentially early employees, must remain with the company to fully earn their equity. Additionally, a lock-up period may be specified to restrict the sale or transfer of shares for a certain duration after receiving investment. 8. Exclusivity and Due Diligence: The term sheet may grant the angel investor a period of exclusivity, during which the company agrees not to negotiate with other potential investors. Additionally, the term sheet may specify a timeframe within which the investor will conduct due diligence on the company before finalizing the investment. If considering different types of Virginia Angel Investment Term Sheets, there may be variations in specific terms and conditions that cater to various investment structures, risk profiles, or industry-specific requirements. Examples may include seed round term sheets, series A term sheets, growth equity term sheets, or SAFE (Simple Agreement for Future Equity) term sheets. Each type of term sheet will vary in complexity and sophistication based on the specific needs and stage of the company seeking investment.
