Colorado Angel Fund Promissory Note Term Sheet

• Category: Small Business - Investment or Funding
• State: Multi-State
• Control #: US-ENTREP-004-1
• Format: Word; Rich Text

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.

The Colorado Angel Fund Promissory Note Term Sheet is a comprehensive document used by the Colorado Angel Fund to outline the terms and conditions of their investment in early-stage startups and entrepreneurial ventures. The term sheet serves as a precursor to the promissory note and spells out the key provisions and provisions specific to the funding process. With a focus on supporting high-growth potential companies, the Colorado Angel Fund offers various types of term sheets to cater to the diverse needs of startups. These term sheets may include: 1. Convertible Debt Term Sheet: This type of term sheet outlines the terms of a convertible debt investment by the Colorado Angel Fund. Convertible debt is a financial instrument that allows the fund to provide funding to startups as debt initially, which can later convert into equity upon specific trigger events, such as the company's next financing round. 2. Equity-Linked Term Sheet: An equity-linked term sheet focuses on investment arrangements where the Colorado Angel Fund acquires an equity stake in the startup in exchange for their investment. This type of term sheet delves into the details of equity valuation, ownership percentages, vesting schedules, and other relevant terms. 3. Valuation Cap Term Sheet: A valuation cap term sheet is utilized when the Colorado Angel Fund aims to set a maximum valuation at which their convertible debt investment can be converted into equity. This protects the fund from potential overvaluation of the startup in future financing rounds, ensuring they receive a fair return on their investment. 4. Board Representation Term Sheet: In cases where the Colorado Angel Fund desires active involvement in the startup's decision-making process, a board representation term sheet may be executed. This type of term sheet outlines the conditions under which the fund will have the right to appoint a representative to the startup's board of directors, enabling them to actively participate in strategic discussions. Colorado Angel Fund Promissory Note Term Sheets typically include key provisions such as the principal amount of the investment, interest rates, maturity dates, prepayment terms, and default provisions. Additionally, they may cover aspects like investor rights, confidentiality, anti-dilution protection, and information rights, providing a well-rounded framework for the investment agreement. These term sheets create a transparent and structured framework for investment transactions, protecting both the Colorado Angel Fund and the startups it supports.