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A Seed investment agreement sets out the terms when early-stage investors put money into a startup in South Africa, typically in exchange for shares or convertible notes. These agreements protect both founders and investors by clearly spelling out key details like valuation, share price, and investor rights under the Companies Act.

The agreement also establishes important governance rules, including board representation and voting rights. Most South African seed deals range from R500,000 to R2 million, with investors usually getting preferred shares that come with special rights like anti-dilution protection and first refusal on future funding rounds.

Use a Seed investment agreement when your startup needs its first major capital injection from external investors in South Africa. This agreement becomes essential once you've moved beyond friends-and-family funding and are ready to bring in angel investors or early-stage venture capital firms who expect formal investment terms.

The timing is right when you need R500,000 to R5 million to scale your business, but aren't yet ready for Series A funding. Having this agreement in place protects both parties during this critical growth phase and helps avoid future disputes about ownership, control, and investor rights under the Companies Act.

• Basic equity investment: The standard Seed investment agreement where investors receive ordinary shares, common in South African tech startups
• SAFE agreements: Simple agreements for future equity that convert to shares later, gaining popularity among Cape Town's startup hub
• Convertible notes: Debt-based agreements that convert to equity, often used when valuation is unclear
• Preference share structures: Gives investors priority rights on dividends and liquidation, popular with venture capital firms
• Hybrid structures: Combines elements of debt and equity, offering flexibility for both parties under SA company law

• Startup Founders: Sign the Seed investment agreement as company representatives, often after negotiating key terms like valuation and board rights
• Angel Investors: Individual investors who provide early-stage capital, typically between R500,000 and R2 million
• Venture Capital Firms: Professional investment companies participating in seed rounds, often leading deal negotiations
• Corporate Lawyers: Draft and review agreements to ensure compliance with SA Companies Act and protect client interests
• Company Directors: Must approve and implement the agreement's terms as part of their fiduciary duties

• Company Details: Gather current shareholding structure, company registration documents, and director information
• Valuation Data: Determine pre-money valuation and share price calculation methodology
• Investment Terms: Define amount, type of shares, and any special rights or restrictions
• Due Diligence: Prepare financial statements, business plan, and relevant contracts for investor review
• Governance Rules: Outline board composition, voting rights, and decision-making processes
• Exit Provisions: Detail mechanisms for future funding rounds, share transfers, and potential company sale

• Party Details: Full legal names, registration numbers, and addresses of the company and all investors
• Investment Terms: Precise amount, share class, price per share, and payment conditions
• Warranties: Company representations about its financial status, assets, and legal compliance
• Shareholders' Rights: Voting powers, board representation, and pre-emptive rights on future shares
• Transfer Restrictions: Rules for selling shares, tag-along and drag-along provisions
• Exit Mechanisms: Procedures for IPO, company sale, or winding up
• Dispute Resolution: South African jurisdiction and arbitration procedures

A Seed investment agreement differs significantly from a Pre-seed Angel investment agreement in several key aspects, though both deal with early-stage funding. Understanding these differences helps you choose the right agreement for your funding stage.

• Investment Size: Seed rounds typically involve R500,000 to R5 million, while pre-seed deals are usually under R500,000
• Investor Profile: Seed agreements often involve professional investors or VCs, while pre-seed deals are typically with angel investors or family offices
• Legal Complexity: Seed agreements include more sophisticated terms like anti-dilution rights and detailed governance provisions; pre-seed agreements are usually simpler
• Company Stage: Pre-seed deals happen at idea or prototype stage, while seed funding comes when there's some market validation
• Valuation Approach: Seed rounds require formal valuation methods, while pre-seed often uses convertible instruments or rough estimates