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 Vermont Angel Investment Term Sheet is a legally binding document that outlines the terms and conditions of an angel investment in Vermont. It serves as a framework for the investment deal and sets forth the rights and obligations of both the investor and the entrepreneur or business seeking funding. This term sheet is specifically designed for use in angel investments within the state of Vermont, taking into consideration the relevant laws and regulations specific to the state. The document typically consists of several sections covering key aspects of the investment. These sections may include: 1. Investment Amount: This section specifies the total amount of funding that the angel investor is willing to provide to the business, either as a lump sum or in installments. 2. Valuation: The valuation section determines the pre-money valuation of the business, which helps in calculating the investor's equity stake in the company. 3. Securities: This part defines the type of securities being offered to the investor in exchange for the investment, such as preferred or common stock, convertible notes, or equity options. 4. Liquidation Preferences: Liquidation preferences outline the order in which investors receive their returns in the event of a liquidation, acquisition, or sale of the company. Different classes of equity may have different preferences. 5. Board Representation: This section addresses whether the investor will have the right to appoint a representative to the company's board of directors, allowing them to participate in key decision-making processes. 6. Anti-dilution Protection: Anti-dilution provisions protect the investor from equity dilution that may result from future equity issuance sat a lower valuation. There can be full ratchet or weighted average anti-dilution formulas. 7. Investor Rights: This part covers the rights granted to the investor, such as information rights (access to financial statements and other business information) and registration rights (the right to demand the company to file for an initial public offering). 8. Restrictions on Transfer: These clauses detail any restrictions placed on the transfer of the investor's securities, such as lock-up periods or rights of first refusal. 9. Governing Law and Jurisdiction: The term sheet typically specifies the governing law of Vermont and the jurisdiction in which any legal disputes will be resolved. In addition, there may be different types of Vermont Angel Investment Term Sheets based on the nature of the investment or the particular situation of the parties involved. Some of these may include: 1. Seed Investment Term Sheet: When an investor is providing funding to a startup at its very early stage, this term sheet specifically addresses the unique considerations and risks associated with seed-stage investments. 2. Series A Investment Term Sheet: This term sheet is relevant for subsequent rounds of funding after the seed stage. It commonly includes more detailed provisions on liquidation preferences, anti-dilution protection, and investor representation on the board. 3. Convertible Note Term Sheet: Convertible notes are a popular form of investment in early-stage startups. In this case, the term sheet outlines the terms for the convertible note, such as the conversion discount, maturity date, and interest rate. It is essential for both investors and entrepreneurs to carefully review and negotiate the Vermont Angel Investment Term Sheet to ensure alignment of interests and protection of rights. Seeking legal advice is highly recommended ensuring compliance with applicable laws and regulations.
