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.
A Tennessee Angel Investment Term Sheet is a legally binding document that outlines the terms and conditions of an investment made by an angel investor in a startup or early-stage company based in Tennessee. This document serves as a preliminary agreement between the investor and the entrepreneur, defining the key aspects of the investment deal. The term sheet will typically include various clauses and provisions that cover important areas such as the amount of investment, the valuation of the company, the percentage of ownership the investor will receive, and the rights and privileges associated with that ownership. It also outlines the timeline of the investment, including any milestone-based funding or follow-on investment options. One type of Tennessee Angel Investment Term Sheet is the Preferred Stock Purchase Agreement. This agreement specifies that the angel investor will receive preferred stock, which grants them certain advantages over other shareholders, such as priority in receiving dividends or liquidation preferences. Another type of term sheet is the Convertible Note Agreement, commonly used when the company is in its early stages and the valuation is uncertain. In this case, the investment is made through a convertible note, which is a debt instrument that can later be converted into equity based on predefined terms. The term sheet may also include provisions related to investor rights, such as board representation, information rights, or participation in future financing rounds. It may outline any restrictions or limitations on the entrepreneur, such as non-compete or non-disclosure agreements. It is important for both the investor and the entrepreneur to carefully review and negotiate the term sheet before proceeding with the investment. Once both parties agree on the terms, the term sheet becomes the basis for preparing the final investment contract, which includes more detailed legal and financial terms. In summary, a Tennessee Angel Investment Term Sheet is a foundational document that outlines the key terms and conditions of an investment made by an angel investor in a Tennessee-based startup. It serves as a preliminary agreement before a more comprehensive investment contract is finalized. The two main types of term sheets include the Preferred Stock Purchase Agreement and the Convertible Note Agreement.
