If you choose them wisely, most of the legal details you negotiate will be of little importance. If you stumble, but clearly communicate the reasons for the failure and your measures to tackle it, most angels will remain on you. (They wouldn`t have invested if they hadn`t believed in you). Start-up founders should take into account the following five essential provisions of an angel agenda: Any change in capital structure, new shares, options or debts must be approved by the majority of investors in this cycle. The main advantage of this structure is that the parties may defer setting an valuation of the business until a future funding cycle. When the next round is over, the debt turns into shares at the purchase price determined at that time, sometimes with a discount of 10% to 25%, to reward the angel for his early investment. Less typical provisions are exclusive alliances that force the start-up to cease investment discussions with others, but some more organized angel unions contain such provisions in their standard term sheets. (If so, founders should not limit this period to more than 30 to 60 days.) Common shares are residual value shares of the same class issued to the founders of a start-up. Convertible preferred shares are shares that have a liquidation preference over common shares (with Engel transactions, usually the initial price of the investment) and can be converted into common shares of residual value. I`m not a fan of change notes as a form of an angel investment. When I make an angel investment, I prefer to rent the tour and do a „series A light“ (simple terms, but always a preferred instrument.) Basil Peters has published a series of articles on Angel`s Blog, which talks about convertible note issues for Angel Investing, offers exchangeable shares for Angel Investors and even offers a one-page sheet for Angel`s Investors. If you are an angel who negotiates with a company or company on the way to a tour of angels, you should take a look at the one-way concept sheet of Basil Peters.
It is full of good ideas on how to reach an agreement without huge legal bills. Without a standard trading style, startups and angels end up turning their wheels into negotiations. In this context, many angelic groups have attempted to standardize their concept sheets in order to streamline the consideration and resolution of some of the key issues (such as corporate governance) that startups and their investors face. Please consider pre-emption rights granted to investors or any right of approval for future financing cycles. If you have several angels, you can create a corporate governance regime that will include an independent assessment of the alternatives available and would offer some protection against investor appreciation or opportunism. This is not a theory or an academic exercise. This terminology sheet is now used by Engelsfonds in BC. Most Engel concept sheets contain basic confidentiality obligations (especially when proposed investors have not signed a confidentiality agreement). The fund, along with all union investors (the „investors“) acquire common shares (the „shares“) at a price of USD per share. The global cycle for all investors is , by which the fund – invests to acquire a total of shares.
As long as investors hold their shares and up to a liquidity event, they have the right to exchange them for the same type and class of securities issued by the company (the „new securities“) in any financing follow-up if these new securities have rights greater than the shares.