How To Write Angel Investor Agreements That Make Investors Say Yes
Angel investor agreements form the backbone of the relationship between startups and their early investors. Private investors, a category of angel investors, provide…
[SERVICE]Fundraising agreements
Fundraising agreements, from SAFE agreements to convertible notes
SAFEs and convertible notes let you raise quickly and defer the valuation. We structure, draft and negotiate them with your next round in mind, and keep the raise inside securities law.
[01]Who it's for
For founders raising their first rounds.
Compared with a priced equity round, SAFEs and notes close faster, adapt to different investors, cost less to paper and tie investors’ returns to your next round.
Pre-seed founders
Friends, family and first angels, on terms that will not haunt the seed round.
Seed-stage startups
Several SAFEs or notes, with caps and discounts you can model.
Life sciences and deep tech
Longer timelines to a priced round, where note maturity and caps matter more.
Founders facing diligence
Investors asking for your documents, cap table and proof that the company owns its IP.
[02]What we handle
Raise now, without regretting the terms later.
Every term in a SAFE or note changes how much of the company you own after the next round. We help you understand the numbers before you sign.
Investors look hard at IP ownership. We check that the company owns what it is raising on, and fix gaps before diligence finds them.
What we draft and negotiate
- SAFEsWith a valuation cap, a discount or a most favored nation clause, plus side letters such as pro rata rights.
- Convertible notesInterest, maturity, discount, cap, conversion triggers and what happens on an acquisition or dissolution.
- Term sheets and negotiationKey deal points, market expectations and representation in talks with investors.
- Diligence and securities complianceDocument preparation, red flags, Regulation D exemptions and filings.
Terms founders regret
- A cap that is too lowGiving away more of the company than the round justified.
- Stacked SAFEs nobody modeledDilution that only shows up when they all convert.
- A note that comes dueMaturity before a priced round, with repayment on the table.
- A raise outside securities lawSelling to the wrong investors, or advertising without the right exemption.
[03]The basics
What is a SAFE agreement?
A SAFE agreement, or simple agreement for future equity, is a contract in which an investor pays money now for the right to receive shares later, usually when the company raises a priced equity round. Y Combinator introduced it in 2013. A SAFE is not debt, so it carries no interest and no maturity date.
Key terms in a SAFE
- Valuation cap. The highest valuation at which the SAFE converts, which rewards investors for coming in early.
- Discount. A percentage off the price new investors pay in the priced round.
- Most favored nation. If you later issue SAFEs on better terms, this investor can take them too.
- Pro rata rights. The right to invest in a later round to keep their ownership percentage, often in a side letter.
- Conversion and liquidity events. What happens in a priced round, an acquisition or a dissolution before conversion.
Pre-money or post-money SAFE
Y Combinator’s post-money SAFE, introduced in 2018, fixes each investor’s ownership as a percentage of the company after all the SAFEs convert. That makes each investor’s stake easy to see, but the dilution from every additional SAFE falls on the founders. Model the cap table before you sign more than one.
Before your first raise, read how to write angel investor agreements that make investors say yes and why patents are important to investors.
[04]Your options
SAFE vs convertible note. Which should you use?
Both defer the valuation to the next priced round. The difference is whether the investment is debt.
| SAFE | Convertible note | |
|---|---|---|
| What it is | A right to future equity | A loan that converts into equity |
| Interest | None | Yes, usually added to what converts |
| Maturity date | None | Yes. The note can come due before a priced round |
| Cap and discount | Common | Common |
| On the balance sheet | Not debt | Debt until it converts |
| Where it fits | Fast, simple early rounds | Investors who want creditor protection, or longer timelines |
[05]Around the raise
Term sheets, diligence and securities law.
The agreement is only part of the raise. Three other pieces decide how smoothly it closes.
Term sheets and negotiation
We prepare term sheets that set out the key deal points, explain what is standard for your stage and where there is room to negotiate, and represent you in negotiations with investors, balancing what you need now against future rounds and an exit.
Due diligence
Investors will ask for your formation documents, cap table, material contracts and proof that the company owns its IP. We help organize and review those documents, address red flags before investors find them, advise on what to disclose, and work with your accountants and advisors so the picture is complete.
Securities compliance
A SAFE or a note is a security, so the raise needs an exemption from registration. Most startup rounds rely on Regulation D. Rule 506(b) bars general advertising and allows a limited number of non-accredited investors, while Rule 506(c) allows advertising if every investor is accredited and verified. A Form D is generally filed with the SEC within 15 days after the first sale, and many states require a notice filing too. Regulation Crowdfunding is another route for raising from the public through a registered platform.
Before you raise, set up the company right on our business formation page, and protect the invention with a patentability search.
[06]Fees
One flat fee, quoted before work begins.
There is no hourly billing. Your fundraising work is quoted as a flat fee on your strategy call, once the scope is clear, and nothing starts until you approve it.
Book A Free Strategy CallWhat sets the fee is the work itself, not the time on the clock.
- The instrument. A standard SAFE, a negotiated note or a full term sheet.
- The number of investors. One angel, or a round with several investors and side letters.
- Diligence and filings. Document review, red-flag cleanup and securities filings.
Ongoing work for a growing company can run on a monthly Fractional IP Counsel plan instead of one fee per document. This service is not covered by The RLG Guarantee, which applies to patentability searches, provisional patents, design patents and trademarks.
[07]The process
From first call to money in the bank.
What happens at each step and who does the work. When the round closes depends on your investors and is never a promised date.
FundraisingCall to close
- Day one01Day oneStrategy callFree. Walk us through the deal, the documents or the problem.
- Flat fee02Flat feeScope and flat feeWhat the work covers and its price, in writing, before it begins.
- 03Structure and documentsWe recommend SAFE or note terms, then draft the documents.
- 04Negotiation and diligenceInvestor questions answered and terms worked through, with you approving each change.
- 05Closed and filedSigned, funds received and securities filings made.
[08]Questions
Questions about SAFEs and fundraising agreements.
Still deciding? Your first call is free and comes with a straight answer on the terms that fit your raise.
Book A Free Strategy CallWhat is a SAFE agreement?
A simple agreement for future equity. An investor pays now and receives shares later, usually at the next priced round, at a price set by a valuation cap or discount. It is not a loan, so there is no interest or maturity date.
Should I use a SAFE or a convertible note?
Most early founders use SAFEs because they are simpler and are not debt. A convertible note can make sense when investors want the protection of a loan, or when a priced round is far off. Watch a note’s maturity date, because it can come due before you raise.
What valuation cap should I set?
It depends on your stage, traction, market and the investors you are talking to. The key is to model what each cap means for your ownership after all SAFEs convert, which we do with you before you sign.
Do I need a lawyer to raise money with a SAFE?
Standard SAFE forms are widely used, but a lawyer helps you choose the terms, avoid stacking SAFEs you have not modeled, handle side letters, prepare for diligence and file what securities law requires.
Is a SAFE a security?
Yes. That means the raise needs an exemption from registration, usually under Regulation D, and often a Form D filing with the SEC within 15 days after the first sale, plus state notice filings.
What do investors check in due diligence?
Formation documents, the cap table, material contracts, employment and contractor agreements, and whether the company owns its IP. Missing IP assignments from founders or contractors are among the most common problems found.
Do patents help a startup raise money?
They can. Investors look at whether the technology is protected and owned by the company. A filed patent application, even a provisional, shows the invention is protected and dated.
How much do fundraising agreements cost?
With us it is a flat fee, quoted on your strategy call before any work begins. It depends on the instrument, the number of investors and how much diligence and filing work the round needs.
[09]Learning Center
Go deeper on raising money.
Why Patents Are Important to Investors: The IP Factor That Raises Startup Valuations
Private sector R&D spending hit $673 billion in 2022—75% of America’s record $892 billion total—primarily driven by companies’ confidence that patents will protect their…
5 Critical Factors VC’s Consider When Valuing A Company
Finding a VC firm that will give you the capital needed to take your company to the next level is a difficult process.Rejection is frustrating, and even worse when you…
[10]Client reviews
Founders who built with us.
4.7 across 614 public reviews on Google, Trustpilot and Avvo.
#1Top reviewed IP law firm*
Read client reviews“The Rapacke Group stands by their fees with no surprises.”
Lowell CrawfordClient review “From creating a new business and checking to make sure we were in full compliance, the team at The Rapacke Law Group handled everything with ease for us.”
Aqua Fire PitBusiness formation · Client review “I always felt confident that my intellectual property was in good hands.”
JakePatent · Client review
Reviews reflect individual client experiences. Quotes are excerpts. Prior results do not guarantee a similar outcome. *#1 top reviewed means the most public client reviews on Google, Trustpilot and Avvo of any US patent or trademark firm.
Raise on terms you understand.
Talk through your raise, your investors and your timeline. The call is free, with no obligation.