The amount of equity received by the investor depends on the valuation you have agreed with the investor. So if you estimate the business at $1,000,000 and the investor pays $150,000 in cash, they would receive 15% of your business. In general, the founders agree to grant Engeln reporting rights commensurnable to the nature of their investment, provided that the implementation of the commitments does not significantly affect the pursuit of the start-up`s objectives. And if a startup has found the right type of angel investor that could add value to the company, the founders will hire these angels willingly. This is a critical point in the development of each startup, because the arrangements on which you agree here are taken into account for the life of the Angel investment agreement. In this article, we outline some of the key contractual conditions that you need to pay attention to when negotiating an agreement to accept external investments and why they should not be concerned. The first documents that an angel will probably see when considering a deal are a dropsheet and/or a business plan; I hope both. A storage sheet usually contains a series of standard titles, and the information is provided on a maximum of one or two pages. Titles may include: product or service, problem that is solved, competitor, market, team, finance. The business plan is a longer document, up to 20-40 pages, and details the company`s growth plan. When small entrepreneurs talk about taking an extra investor, they usually say something undilble like, “We take an angel investor.” What they are not discussing is the many ways in which this investor can actually invest.
But they should, because the different way an investor can invest in a business, radically change the deal you agree with. Your conversation with the angels (even passive ones) does not end at the end. Regardless of the actual conditions of the shareholders` pact, it is worth recognizing that the quality of a founder`s personal relationship with his investors informs the tone of corporate governance. In addition to the investment agreement, there will inevitably be other documents that can be negotiated, prepared and signed. This may include IP licenses, employment contracts, key insurance, advertising letters, new statutes, administrative protocols, share certificates and company home forms. 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.