Cuyahoga Ohio Angel Investor Agreement

State:
Multi-State
County:
Cuyahoga
Control #:
US-02585BG
Format:
Word; 
Rich Text
Instant download

Description

Angel investors are generally wealthy individuals who provide capital to help entrepreneurs and small businesses succeed. They are known as "angels" because they often invest in risky, unproven business ventures for which other sources of funds -- such as bank loans and formal venture capital -- are not available. New startup 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 startup, 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 startup phase and they are often willing to do this while staying out of the day-to-day management of the business.
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FAQ

A typical vesting period for an employee or Founder might be 3 4 years, which would mean they would earn 25% of their stock each year over a 4 year period. If they leave early, the unvested portion returns back to the company.

The general rule of thumb for angel/seed stage rounds is that founders should sell between 10% and 20% of the equity in the company.

Angel investor terms are used to define the relationship between an investor and the company receiving the investment. The terms of this type of agreement are established with a non-binding document called a term sheet.

Angel investing groups generally aim to take 20 to 50 percent ownership stake of early-stage companies. Therefore, structuring the deal and negotiating the terms begin with the valuation of the company.

A: Angel investors typically want to receive 20% to 25% of your profit. However, how much you pay your angel investors depends on your initial contract. Hammer out these details before they give you any money, and have a lawyer draw up a contract, which will make your angel investors feel safer in their investment.

Angel investors usually take between 20 and 50 percent stake in the companies they help. Sometimes the exact amount is determined strictly by negotiation. However, frequently angel investors use a company's valuation as a measure for how much ownership they should take.

Angel investors can operate independently or as part of a larger investment group, sometimes known as a syndicate. In terms of how much money angel investors can bring to the table, it's not unusual for a typical investment to range from $25,000 to $100,000.

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In general, angel investors expect to get their money back within 5 to 7 years with an annualized internal rate of return (IRR) of 20% to 40%. Venture capital funds strive for the higher end of this range or more.

Both of those sources of money are taxable, at different rates, through income taxes and capital gains taxes. Angel investing falls into the second category. If you invest in a startup, and it gets sold, and your share is worth a lot more money than you paid, you'll pay capital gains taxes on that amount.

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Cuyahoga Ohio Angel Investor Agreement