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 Alameda California Angel Investment Term Sheet is a crucial document that outlines the terms and conditions of an investment between an angel investor and a startup company in Alameda, California. This term sheet sets the foundation for the investment process and ensures that both parties understand their rights, obligations, and the overall structure of the investment deal. Key terms commonly found in an Alameda California Angel Investment Term Sheet may include: 1. Valuation: This term determines the pre-money valuation of the startup and helps establish the percentage of ownership the angel investor will receive in exchange for their investment. 2. Investment amount: Specifies the amount of funding the angel investor is willing to provide to the startup, which often depends on the startup's needs, growth potential, and market conditions. 3. Equity stake: States the percentage of equity the angel investor will receive in the startup. This is typically negotiated to strike a balance between the investor's desired return and the entrepreneur's desire to retain ownership control. 4. Liquidation preference: Outlines how the proceeds from the company's exit, such as through an acquisition or IPO, will be distributed. It safeguards the angel investor's investment by ensuring they receive their initial investment back before any other distribution takes place. 5. Board representation: Specifies whether the angel investor will have the right to appoint a representative to the startup's board of directors, allowing them to have a direct say in the company's strategic decisions. 6. Anti-dilution provisions: Protects the angel investor from dilution in case the startup raises additional funding at a lower valuation. It typically gives the investor the right to receive additional shares or adjust the conversion price of their investment. 7. Exit strategy: Outlines the potential exit options for the angel investor, such as a buyback provision, mandatory sale, or right of first refusal. Alameda California may have various types of Angel Investment Term Sheets, including convertible notes, which are short-term debt instruments that convert into equity at a predetermined valuation or discount during a subsequent financing round. Other types may include preferred stock financings, safe agreements (Simple Agreement for Future Equity), or revenue-based financing. It's important for both investors and entrepreneurs to carefully review and negotiate the terms in an Alameda California Angel Investment Term Sheet before proceeding with the investment. Seeking legal advice is highly recommended ensuring all parties are protected and have a clear understanding of the terms negotiated.
