Creating an angel investor term sheet template involves several key elements to ensure that both parties involved have a clear understanding of the terms and conditions of the investment. Here are some essential components you should include:
1. Company Information
Start with a brief description of the company, including its legal name, type of business structure, and location. This section should also mention the founders and their roles within the company.
2. Investment Details
This section should outline the total investment amount, the type of equity being offered in return (common shares, preferred shares, or convertible notes), and the price per share. It should also include the pre-money valuation of the company.
3. Conditions of the Investment
Outline any specific conditions that must be met for the investment to take place. This could include milestones the company needs to reach, or certain documents that need to be provided.
4. Voting Rights and Control
Specify the voting rights of the investor. This could include the right to vote on major decisions affecting the company, such as mergers or acquisitions, changes to the company’s business model, or changes to the company’s bylaws.
5. Liquidation Preference
Detail how the proceeds would be distributed if the company is liquidated. Usually, preferred shareholders (often the investors) get paid before common shareholders.
6. Anti-Dilution Provisions
This section should address how the investor’s ownership percentage will be protected if the company issues more shares in the future. It helps to maintain the investor’s proportionate control in the company.
7. Board Representation
This should specify whether the investor will have a seat on the company’s board of directors, and if so, the extent of their participation and voting rights.
8. Confidentiality and Non-Compete Clauses
These clauses protect the company’s sensitive information and prevent the investor from using such information to compete against the company.
9. Exit Strategy
This section outlines how the investor can get their money back, such as through a sale of the company, an initial public offering (IPO), or through dividends.
Remember, it’s crucial that both the company and the investor fully understand and agree to the terms outlined in the term sheet before moving forward. It’s often beneficial to seek legal counsel when drafting and negotiating a term sheet.
View Our Presentation Design Portfolio
