Subscription Agreement – This provides the specific stock purchase terms, such as amount of money and number of shares, as well as representations and warranties made by the parties. Most recently, Angels may also be required to sign a Risk Acknowledgement Form #45-106F12 . Investor Declaration – Usually included in the Subscription Agreement, but sometimes its own document, it states that the investor is an Accredited Investor, which allows the company to exercise a prospectus exemption to sell its securities to these high net worth individuals. Voting Agreement – This may be drawn up to enable one designated Angel to vote the other Angels’ shares. Restated Articles of Incorporation – These are often required to enable the creation of new share classes for the investee company. Vesting Agreements for Founder Shares – These are created if some investors insist that the founders cannot keep their shares (i.e., vest) if they leave the company. Some will allow the shares to vest over two or three years, whereas others will not allow the shares to vest until an exit event.
Board and Shareholder Approvals
Secretary and CEO Representations and Warranties
Stock Option Agreements
Assignment of Intellectual Property
Share Certificates – These show that the company has issued the shares purchased.
Deal-Killers Investors agree that a lack of trust is the biggest deal-killer. No trust – no deal! There are a thousand ways that trust might be damaged before the final deal is signed. Lying is the surest way to kill a deal. There is also the danger of the “straw that broke the camel’s back” or “death of a thousand cuts.” Angels don’t have to deploy their capital, and so may drop out of the deal due to annoyance, lack of confidence, or distraction by family, extended holidays or other interesting deals.
How to Achieve Good Returns
79
Powered by FlippingBook