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 Kentucky Angel Investment Term Sheet is a legal document that outlines the terms and conditions of an equity investment made by an angel investor in a startup or early-stage company based in Kentucky, United States. This term sheet serves as the foundation for negotiating the investment agreement between the investor and the entrepreneur. Key elements typically included in the Kentucky Angel Investment Term Sheet are: 1. Investment amount: The term sheet specifies the total investment amount that the angel investor is willing to provide to the company. This can be a lump sum or a staged investment over multiple rounds. 2. Valuation: The term sheet states the pre-money valuation of the company, which is crucial for determining the percentage of equity the investor will receive in exchange for their investment. The valuation can be determined through negotiations or by using a specific valuation method. 3. Equity stake: The term sheet defines the percentage of ownership the angel investor will have in the company after the investment. This is calculated based on the investment amount and the pre-money valuation. 4. Liquidation preference: It outlines whether the investor will have a specific preference or priority in receiving their investment back in case the company is sold or liquidated. 5. Dividend rights: The term sheet addresses whether the investor will have rights to receive dividends or participate in any profit-sharing before the entrepreneur or other shareholders. 6. Control provisions: This section outlines the extent of control or decision-making power the investor will have in the company. It may include provisions regarding board seats, voting rights, and consent requirements. 7. Anti-dilution protection: The term sheet may include anti-dilution provisions that protect the investor from significant equity dilution if subsequent financing rounds occur at a lower valuation. 8. Founder vesting: In some cases, the entrepreneur's equity may be subject to vesting over a specific period. This ensures that the founder remains committed to the company's long-term success. 9. Reporting and information rights: The term sheet may specify the requirements for periodic reporting and providing financial and business updates to the investor. Different types of Kentucky Angel Investment Term Sheets may vary based on the specific needs and preferences of the investor or the entrepreneur. These variations can include different terms, conditions, or provisions tailored to the unique circumstances of the investment. However, the key elements mentioned above are generally covered in most term sheets.
