2.1 Startup evaluation

Startup evaluation is subject to negotiation. An early-stage startup valuation may not be a fixed value (like seed stage, series A stage, series B stage) and it affects the amount of equity investors receive, so angel investors negotiate valuations to achieve fairness and value the startups they invest in too much. Entrepreneurs raise capital in exchange for part of their startup. A startup’s valuation determines how much equity it has to give up. Some entrepreneurs may have subjective evaluations of their startups, which negatively impacts their bargaining efforts with angel investors. It could end up valuing the startup so highly that it could discourage angel investors.

2.2 Amounts to Raise

You will also need to negotiate the amount of money will need. Both investors and founders should be satisfied with the amount offered or raised. Entrepreneurs want to make as much money as possible so they can relax, execute their plans, and have an extra buffer. Investors, on the other hand, are aware of the risks and want to donate as little as possible because they may have multiple projects to invest in.

Through our program, our team will set up a fundraising strategy and help plan how much to raise and how much equity to give up based on the valuation of the startup and other startups in the market.

2.3 A Healthy Relationship with Angels

To close a deal on terms that are suitable for both parties, it is necessary to have a good relationship with the angel investor. Not only will this help you have fruitful negotiations with your angel investors and agree on the right terms, but also because some of your potential angel investors may be interested in getting involved. 

We work with startup teams in building healthy relationships with potential angel investors. Our team of experts and insiders will review Angel’s proposed investment terms and work with you to come up with a suitable agreement that emphasizes mutual benefits (success, startup growth and prosperity, high ROI, etc.).

2.4 Multiple Transactions

Considered sometimes it feels like Entrepreneurs who rely on their own direct connections may find it very difficult to close deals, not to mention multiple deals on the negotiating table.

We will help you reach several angel investors. Having multiple offers greatly increases an entrepreneur’s bargaining power. Let’s say a startup wants to raise $500,000. It can raise this amount from one or two business angels. Having two means that each angel investor feels less risky and entrepreneurs can negotiate how much each is willing to contribute.

Our team will help you find the right, fair and accurate valuation of your startup before finding an angel investor. Based on financial projections, consider startup KPIs such as revenue, cash flow, and milestones reached. We also evaluate startups based on industry and market conditions and trends. If you have an early stage startup and are looking for early stage funding but don’t have enough traction and revenue, we can help you find your startup successfully funded and other similar stages, industries, locations, etc.

2.5 Legal advice

Entrepreneurs are likely raising capital for the first time and are unfamiliar with the legal forms to sign with it. In such cases, it is important to consult an attorney to review the terms or suggest that some of the terms be changed.

How can we help?

Deep Future has several standard contracts that protect the rights of both angel investors and entrepreneurs. We also assist entrepreneurs in conducting legal review of contracts and may suggest some contract amendments to ensure both parties are satisfied.

2.6 Build a deal

Finding the best structure for dealing with angel investors is an important aspect of completing a funding round. After talking to your angel investor, you should start structuring your deal and setting a framework. We need to make sure that the team, previous investors and new investors are all happy with the new deal structure. When approaching potential angels, you should have a clear idea of ​​what they are looking for from an investment perspective. Typically, an angel invests $25,000 to $150,000 in a startup. A portion of the company (10% to 30%) will be allocated to angel investors and the rest will be distributed to other early investors. You should also be prepared to answer any questions you may be asked about your business and its prospects. Angels are interested in learning all about your business before making an investment decision. Additionally, many angels participate in due diligence visits and phone interviews with startups prior to investing.

How can we help?

Deep Future also provides advice and consultancy on structuring investment deals with angel investors. This includes, but is not limited to, negotiating equity stakes investors will receive in startups, funding timelines, multiple installments, roles and responsibilities.

2.7 Conclusion of the contract

There are several important considerations when finding and negotiating investment agreements with Angels. You need to make sure your angel investor knows your company and the market you’re targeting, has a solid business plan and a track record of delivering results. You also need to be candid about the risks and benefits of investing in your business. How can we help?

Through our process, during the negotiation stage with the angel investor, the entrepreneur finalizes the investment contract by defining the overall framework with the angel investor and the appropriate terms that suit both parties’ interests. We also provide legal advice on paperwork and signing legal documents.

2.8 Sign the term sheet

Before you agree to sign a term sheet with an angel investor, there are a few things you should know:

• There’s no guarantee that angel investors will invest in your startup, but if they do, they can be very helpful in getting your company off the ground.
• Angels typically expect a 7% to 10% return on investment.
• You are in constant communication with your business angel. They are your biggest supporters and will help your startup succeed.

2.9 Negotiation closed

This stage begins after you set your investment terms and agree to all terms and conditions. All documents that investors are required to sign must be reviewed.

Once you reach the stage of signing a contract through a funding program, our team will ensure that the investment contract is signed on the right terms, confirms the contract and provides legal and business advice.