An investment agreement is a legally binding contract that sets out the terms and conditions under which an investor will provide funding to a company in exchange for equity or other financial instruments
An investment agreement covers the investment amount, the type of shares or securities being issued, the valuation of your company, and the rights that come with those shares.
It also outlines any conditions that must be met before the money changes hands, such as due diligence requirements or regulatory approvals.
Whilst a term sheet is a non-binding outline of key deal points, an investment agreement is the detailed, legally enforceable contract that follows.
The investment agreement expands on everything mentioned in the term sheet and includes comprehensive legal protections for both parties.
Investment agreements often grant investors various rights including board representation, approval rights over major business decisions, anti-dilution protection, and information rights.
These provisions help protect the investor's stake and give them influence over the company's direction.
An investment agreement becomes legally binding once all parties have signed it and any conditions precedent have been satisfied.
This typically happens after due diligence is complete and both sides have agreed to the final terms.
If either party breaches an investment agreement, the non-breaching party can seek legal remedies including damages, specific performance, or in some cases, the right to unwind the transaction.
The agreement will specify exactly what constitutes a breach and what remedies are available.
Investment agreement negotiations typically take anywhere from 4-12 weeks, depending on the complexity of the deal, the number of parties involved, and how quickly due diligence can be completed.
Simple agreements for smaller amounts may move faster, whilst complex institutional rounds take longer.
