California Angel Investment Term Sheet

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US-00016DR
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Description

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.

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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.

In Stephen Morrissette's paper, A Profile of Angel Investors, he writes, Studies have found that angel investors hold their investments for about five years and several sources are cited which give holding periods such as 4.8; 5; 5-6; 5-7; 5.1; and 8 years.

The Advantages of Angel Investors Having an angel investor means your business doesn't have to repay the funds because you're giving ownership shares in exchange for money. Angel investing is usually reserved for established businesses beyond the startup phase.

Advantages of angel investorsAngel investors are typically experienced investors who take a long-term view and understand that they may not see a return on their investment for a long period of time. Many angel investors are also looking for personal opportunities in addition to investment opportunities.

Angel investors are typically experienced investors who take a long-term view and understand that they may not see a return on their investment for a long period of time. Many angel investors are also looking for personal opportunities in addition to investment opportunities.

The more money an angel investor gives your business, they more they'll expect a bigger return on investment (ROI). The ROI expectation varies between angels and the specific investing opportunity. It's not uncommon for an angel investor to expect a 30% return on their money.

While there are a number of ways an investment can be structured, deals you come across will commonly be one of three structures:Convertible Notes. Convertible notes (also known as convertible debt), are a form of debt that convert to equity once a company raises a further round of financing.SAFEs.Priced Rounds.

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.

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California Angel Investment Term Sheet