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When it comes to securing funding for your startup, one of the most popular ways to do so is through angel investors. These individuals are typically high net worth individuals who are looking to invest in promising early-stage companies in exchange for equity ownership.

However, before any investment can take place, an angel investor agreement must be established. This agreement outlines the terms and conditions of the investment and protects both the investor and the startup from any potential misunderstandings or disputes down the line.

To help you understand what a typical angel investor agreement might look like, we’ve put together a sample agreement that covers the key aspects of an investment:

1. Investment amount and equity ownership

The agreement should specify the investment amount and the percentage of equity ownership that the investor will receive in exchange for their investment. For example, the investor may agree to invest $100,000 in exchange for 10% equity ownership in the company.

2. Board of Directors

The agreement should also outline whether the investor will have a seat on the board of directors of the startup. If so, it should specify the number of board seats the investor will have and whether they will have any voting rights.

3. Information rights

The investor will want regular updates on the progress of the company, and the agreement should outline how often and in what format they will receive these updates. This could include monthly financial statements or quarterly progress reports.

4. Terms of the investment

The agreement should also specify the terms of the investment, such as whether it is a convertible note or a straight equity investment. It should also outline any conditions for the investment, such as milestone achievements that must be met before the investor releases another round of funding.

5. Termination clauses

Finally, the agreement should outline any termination clauses, such as what happens if the startup fails to meet the milestones outlined in the investment terms or if the investor wishes to exit the investment early.

In conclusion, securing funding from angel investors can be an excellent way to get your startup off the ground. However, it’s essential to have a well-thought-out angel investor agreement in place to protect both you and the investor. By following the above sample agreement, you’ll have a solid starting point for negotiating your investment terms.