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A Pre-seed Angel investment agreement sets out the terms when an early-stage investor (angel) puts money into a South African startup before its first formal funding round. It's the legal foundation that protects both the entrepreneur and investor during this crucial initial investment phase.

The agreement typically covers key aspects like investment amount, equity stake, voting rights, and exit provisions - all aligned with the Companies Act 71 of 2008. It's simpler than later-stage investment contracts but must still include essential safeguards like anti-dilution protection and information rights that let angels monitor their investment's progress.

Use a Pre-seed Angel investment agreement when your startup needs its first external funding but isn't ready for venture capital. This agreement becomes essential the moment you start discussing investment terms with potential angel investors, typically for amounts between R100,000 and R2 million.

The timing is crucial - put this agreement in place before any money changes hands. It protects both parties during the critical early growth phase, especially in South Africa's emerging startup ecosystem. Having clear terms from the start helps avoid costly disputes about ownership, voting rights, and future funding rounds that often arise as startups grow.

• Simple Investment Terms: Basic version using straightforward equity for cash, popular among first-time founders and angels investing under R500,000
• Convertible Note Structure: Debt that converts to equity at the next funding round, with a valuation cap and discount rate
• SAFE Agreement Adaptation: South African version of Y Combinator's SAFE, modified to comply with local company law
• Syndicate Investment Format: Structured for multiple angels investing together, with lead investor provisions
• Milestone-Based Release: Investment released in tranches when the startup hits agreed performance targets

• Angel Investors: High-net-worth individuals providing early capital, often experienced entrepreneurs themselves who offer mentorship alongside funding
• Startup Founders: Entrepreneurs seeking their first external investment, typically at the prototype or early revenue stage
• Corporate Lawyers: Draft and review agreements to ensure compliance with South African company law and protect both parties' interests
• Investment Advisors: Guide angels on deal terms and startup valuation, especially for first-time investors
• Company Directors: Must approve and implement the agreement's terms under their fiduciary duties

• Company Details: Gather company registration documents, shareholder information, and current cap table
• Investment Terms: Define investment amount, equity percentage, and any specific conditions or milestones
• Valuation Method: Document how the startup's current value was determined and agreed upon
• Rights Package: Outline voting rights, board seats, and information access requirements
• Exit Strategy: Specify tag-along rights, drag-along provisions, and share transfer restrictions
• Future Rounds: Include anti-dilution protection and pre-emptive rights for follow-on funding

• Parties and Definitions: Full legal names, company details, and clear definitions of key terms
• Investment Structure: Precise amount, valuation, equity percentage, and payment terms
• Share Class Rights: Detailed description of share type, voting rights, and dividend preferences
• Warranties: Standard company representations aligned with Companies Act requirements
• Protection Provisions: Anti-dilution, pre-emptive rights, and transfer restrictions
• Information Rights: Financial reporting obligations and management access terms
• Exit Mechanisms: Tag-along, drag-along rights, and liquidity event provisions

A Pre-seed Angel investment agreement differs significantly from a Seed investment agreement in several key aspects, though they're often confused. The main distinction lies in timing, structure, and complexity.

• Investment Stage: Pre-seed agreements handle very early investments (usually R100k-R2M) when the startup is still conceptual, while seed agreements cover larger amounts (R2M-R10M) for companies with proven concepts
• Legal Complexity: Pre-seed agreements are intentionally simpler, focusing on basic rights and protections, while seed agreements include more sophisticated investor protections and governance provisions
• Valuation Approach: Pre-seed often uses convertible instruments or simple equity splits, while seed rounds require detailed company valuations
• Future Funding Impact: Pre-seed terms are designed to be flexible for future rounds, whereas seed agreements establish more permanent governance structures