What are typical terms for angel investors?

Common Angel Investment Terms

• Seed Capital (Stage) Just like it sounds, seed capital is the initial capital that funds a business.
• Valuation. The startup valuation of your company represents how much someone other than you thinks it’s worth.
• Term Sheet.
• Convertible Note.
• Dilution.
• Cap Table.
• Common & Preferred Stock.
• Vesting.

What rate of return do angel investors expect?

In general, angel investors expect to get their money back within 5 to 7 years with an annualized internal rate of return (“IRR”) of 20\% to 40\%. Venture capital funds strive for the higher end of this range or more.

How much do angel investors usually invest?

How much do angel investors usually invest? A typical investment is between $15,000 and $250,000, although it can vary significantly. Usually angel investors contribute a relatively small amount of capital into a startup company. Angel investors are often friends or family members.

Do angel investors give term sheets?

As we noted in A Guide To Angel Investing Documents, most angel investments start with or are accompanied by a “term sheet” (or sometimes a “memorandum of understanding”) summarizing the terms of the deal.

What is an angel investor?

Angel investors provide cash for startup companies in exchange for an equity stake in the company. They usually take between 20 and 40 percent, although there is no hard-and-fast rule. Angels will also seek other ways to protect their investment such as a seat on the board of directors.

How much equity should angel investors take in a startup?

Although there is no concrete rule dictating how much equity an angel investor will take in exchange for financial support, the general expectation is between 20 and 40 percent.

Does angelangel investing require a shareholder agreement?

Angel investing almost always requires a shareholder agreement among the founder group and the new investors. In reviewing or crafting any proposal, keep these fundamental points uppermost in your mind: If you choose them wisely, most of the legal details that you negotiate will carry little significance.

What reporting rights should angel investors expect from founders?

Generally, founders agree to provide angels with reporting rights proportionate to the nature of their investment, provided that satisfying the obligations do not materially detract from the pursuit of the startup’s objectives.