An angel investor agreement template, also known as a term sheet or investment agreement, should include a variety of key elements to ensure all parties involved understand their rights, responsibilities, and the details of the investment. Here are some crucial elements that should be included:
1. Overview of the Agreement
This section should provide a general summary of the proposed deal. It should indicate the parties involved, the purpose of the agreement, and the overall terms of investment.
2. Investment Details
This section should include the amount of the investment, the form of investment (equity, convertible note, etc), the valuation of the company, and any details regarding expected return on investment. This is essentially the heart of the agreement.
3. Equity Ownership and Dilution
If the investment is in the form of equity, this section should detail the percentage of ownership the investor will receive and how this ownership may be diluted in the future. It’s essential to be clear on these terms to avoid any misunderstandings later on.
4. Voting Rights and Board Representation
This section specifies if and how the investor will participate in decision-making processes within the company. This might include voting rights, board seats, and other mechanisms of control or influence.
5. Information Rights
Investors usually require certain information rights to monitor their investment. This section specifies what information the company has to provide, how often, and in what format.
6. Liquidation Preferences
This section outlines what happens to the investor’s money if the company is sold, goes public, or otherwise undergoes a liquidity event. It specifies how the proceeds will be divided among the stakeholders.
7. Exit Strategy
This section outlines the anticipated path to a return on investment. This might be a plan for a future sale of the company, an initial public offering (IPO), or another form of exit.
8. Confidentiality Agreement
Since the investor will have access to confidential information, this section should include a clause that protects the company’s proprietary information.
9. Non-Compete Agreement
This section prevents the investor from using the knowledge gained through their investment to compete against the company. It’s not always included, but can be important in some cases.
10. Governing Law
This section establishes which state’s or country’s laws will be used to interpret the agreement and handle any disputes.
Remember, it’s crucial to have an attorney review an angel investor agreement before it’s signed. While this template can help you understand what’s typically included, every investment is unique and requires individualized advice.
View Our Presentation Design Portfolio
