Investment Agreement Template 2025
Professional investment agreement template with comprehensive guide. Learn what an investment agreement is, how to fill it out, and download our template designed by legal experts for startup funding, venture capital, and private equity investments.
Download TemplateWhat is an Investment Agreement?
An investment agreement is a comprehensive legal contract between investors and a company that defines the terms and conditions of an equity investment. It establishes the investor's rights, the company's obligations, the investment amount, company valuation, governance provisions, and protective measures for both parties in the investment relationship.
Investment agreements serve as the foundation for venture capital, private equity, angel investments, and strategic investments. They provide legal certainty about ownership rights, operational control, financial protections, and exit strategies while ensuring that companies receive the capital needed for growth and investors receive appropriate protections and potential returns on their investment.
📋 Key Components of an Investment Agreement
- Investment terms - amount, valuation, equity percentage, and share class
- Investor rights - voting rights, board seats, and information rights
- Protective provisions - veto rights and consent requirements
- Representations and warranties - statements about company condition
- Use of proceeds - how investment funds will be utilized
- Conditions to closing - requirements before investment completion
- Post-closing covenants - ongoing obligations and restrictions
Types of Investment Agreements
| Investment Type | Typical Stage | Investment Size | Key Characteristics |
|---|---|---|---|
| Angel Investment | Pre-seed/Seed | $25K - $500K | Individual investors, convertible notes common |
| Seed Round | Early stage | $500K - $3M | Preferred stock, basic investor protections |
| Series A | Growth stage | $2M - $15M | Institutional VCs, comprehensive terms |
| Series B+ | Expansion | $10M - $100M+ | Later-stage VCs, enhanced protections |
| Private Equity | Mature companies | $50M - $1B+ | Control investments, operational focus |
By Investment Structure
- Equity Investments: Direct purchase of preferred or common stock
- Convertible Notes: Debt that converts to equity at future financing
- SAFE Agreements: Simple Agreement for Future Equity (post-money or pre-money)
- Revenue-Based Financing: Investment based on future revenue sharing
- Debt Financing: Traditional loans with interest and repayment terms
By Investor Type
- Angel Investors: High net worth individuals investing personal funds
- Venture Capital: Professional investment firms managing institutional capital
- Private Equity: Firms focused on mature companies and buyouts
- Strategic Investors: Corporations making strategic investments
- Family Offices: Wealth management for ultra-high net worth families
- Sovereign Wealth Funds: Government-owned investment vehicles
✅ Choosing the Right Investment Structure
- Stage Alignment: Match investment type to company stage and needs
- Investor Fit: Ensure investor expertise aligns with business goals
- Valuation Impact: Consider impact on company valuation and dilution
- Control Implications: Understand governance and control changes
- Future Funding: Plan for subsequent financing rounds
Essential Investment Agreement Terms
Economic Terms
- Investment Amount: Total capital being invested by all investors
- Pre-Money Valuation: Company value before the investment
- Post-Money Valuation: Company value after the investment
- Price per Share: Cost per share of preferred stock
- Ownership Percentage: Investor's percentage ownership post-investment
- Liquidation Preference: Priority in liquidation events (1x, 2x, participating)
- Dividend Rights: Preferred dividend rates and cumulative provisions
Governance and Control
- Board Composition: Number of board seats and appointment rights
- Voting Rights: Class voting and special voting provisions
- Protective Provisions: Investor veto rights on major decisions
- Information Rights: Financial reporting and inspection rights
- Observer Rights: Non-voting board meeting attendance
- Consent Requirements: Investor approval for specific actions
Anti-Dilution and Conversion
- Anti-Dilution Protection: Weighted average or full ratchet protection
- Conversion Rights: Right to convert preferred to common stock
- Automatic Conversion: Forced conversion upon IPO or qualified financing
- Conversion Price Adjustments: Adjustments for stock splits and dividends
- Pay-to-Play Provisions: Participation requirements in future rounds
Transfer and Liquidity Rights
- Tag-Along Rights: Right to participate in founder stock sales
- Drag-Along Rights: Ability to force minority participation in sales
- Right of First Refusal: Priority right to purchase shares being sold
- Co-Sale Rights: Right to participate proportionally in stock sales
- Registration Rights: Rights to register shares for public sale
- Redemption Rights: Right to require company to repurchase shares
⚠️ Critical Negotiation Points
- Liquidation preferences and participation rights
- Anti-dilution protection mechanisms and triggers
- Board composition and voting control
- Protective provisions scope and thresholds
- Option pool size and allocation timing
- Drag-along and tag-along participation requirements
How to Fill Out an Investment Agreement: Step-by-Step Guide
1
Define Parties and Investment Structure
Identify: All parties to the investment and establish the basic investment structure and terms.
- Company's full legal name and jurisdiction of incorporation
- Investor(s) names and entity types (individual, fund, corporation)
- Lead investor designation and responsibilities
- Type of securities being issued (preferred stock, convertible notes)
- Investment round designation (Seed, Series A, etc.)
2
Establish Economic Terms and Valuation
Define: Core economic terms including investment amount, valuation, and financial rights.
- Total investment amount and individual investor commitments
- Pre-money and post-money valuation amounts
- Price per share and number of shares being issued
- Liquidation preferences and participation rights
- Dividend rates and cumulative provisions
3
Set Governance and Control Provisions
Establish: Board composition, voting rights, and investor control mechanisms.
- Board of directors size and composition
- Investor board seat appointment rights
- Voting rights and special voting provisions
- Protective provisions and investor veto rights
- Information rights and reporting requirements
4
Include Anti-Dilution and Conversion Terms
Add: Anti-dilution protections, conversion rights, and share transfer provisions.
- Anti-dilution protection type (weighted average or full ratchet)
- Conversion rights and automatic conversion triggers
- Tag-along and drag-along rights
- Right of first refusal and co-sale provisions
- Registration rights for public offerings
5
Define Representations, Warranties, and Use of Funds
Include: Company representations about its condition and planned use of investment proceeds.
- Corporate organization and authorization representations
- Financial condition and material contract disclosures
- Intellectual property and legal compliance warranties
- Detailed use of proceeds and business plan
- Employee and consultant agreement confirmations
6
Add Conditions to Closing and Post-Closing Covenants
Establish: Conditions that must be met before closing and ongoing obligations post-investment.
- Due diligence completion and satisfactory results
- Legal documentation execution and delivery
- Board resolutions and shareholder approvals
- Post-closing reporting and information obligations
- Operating covenants and business conduct restrictions
⚠️ Legal and Regulatory Compliance
Investment agreements must comply with securities laws, including federal and state securities regulations. Private placements typically rely on exemptions such as Regulation D. Always engage experienced securities attorneys to ensure proper compliance with applicable laws and regulations, especially for institutional investors and complex structures.
Due Diligence Process and Requirements
Financial Due Diligence
- Historical Financials: 2-3 years of audited or reviewed financial statements
- Monthly Financials: Recent monthly financial statements and management reports
- Revenue Analysis: Customer breakdown, recurring revenue, and growth metrics
- Cash Flow: Historical and projected cash flow statements
- Unit Economics: Customer acquisition costs, lifetime value, and margins
- Financial Projections: Detailed 3-5 year financial forecasts
Legal Due Diligence
- Corporate Structure: Incorporation documents, bylaws, and capitalization table
- Material Contracts: Customer agreements, supplier contracts, partnerships
- Intellectual Property: Patents, trademarks, copyrights, and trade secrets
- Employment Matters: Key employee agreements, equity plans, and HR policies
- Litigation: Pending or threatened legal proceedings
- Regulatory Compliance: Industry licenses, permits, and compliance matters
Business Due Diligence
- Market Analysis: Market size, competition, and growth opportunities
- Business Model: Revenue streams, scalability, and competitive advantages
- Management Team: Executive backgrounds, key person dependencies
- Technology: Product development, technology stack, and IP assets
- Customers: Customer concentration, satisfaction, and retention
- Operations: Key business processes, systems, and scalability
Technical Due Diligence
- Product Architecture: Technology infrastructure and scalability
- Security: Cybersecurity measures and data protection
- Development Process: Software development lifecycle and quality assurance
- Technology Risks: Technical debt, dependencies, and obsolescence risks
- IT Systems: Internal systems, data management, and backup procedures
📊 Due Diligence Best Practices
- Create comprehensive due diligence checklist
- Use secure virtual data rooms for document sharing
- Engage qualified professional advisors (legal, financial, technical)
- Conduct management presentations and Q&A sessions
- Verify key assumptions and business metrics
- Document all findings and risk assessment
Valuation and Pricing Methodologies
Startup Valuation Methods
- Comparable Company Analysis: Valuation multiples from similar public companies
- Precedent Transactions: Multiples from comparable M&A and investment transactions
- Discounted Cash Flow (DCF): Present value of projected future cash flows
- Risk-Adjusted NPV: NPV analysis with probability-weighted scenarios
- Venture Capital Method: Target return-based valuation for VCs
- Scorecard Method: Comparative scoring against similar companies
Key Valuation Multiples
- Revenue Multiples: Enterprise value to revenue (EV/Revenue)
- EBITDA Multiples: Enterprise value to EBITDA (EV/EBITDA)
- Growth-Adjusted: PEG ratios and revenue growth multiples
- Industry-Specific: Specialized metrics for different sectors
- User-Based: Value per user or customer metrics
- Asset-Based: Book value and liquidation value approaches
Pre-Money vs. Post-Money Valuation
- Pre-Money Valuation: Company value before new investment
- Post-Money Valuation: Company value after new investment
- Calculation: Post-Money = Pre-Money + Investment Amount
- Investor Ownership: Investment Amount ÷ Post-Money Valuation
- Option Pool Impact: Timing of option pool expansion affects calculations
Valuation Considerations by Stage
| Stage | Primary Factors | Typical Multiples | Key Risks |
|---|---|---|---|
| Pre-Revenue | Team, market, product potential | N/A (stage-based) | Execution risk, market validation |
| Early Revenue | Traction, growth rate, unit economics | 10-50x revenue | Scalability, customer concentration |
| Growth Stage | Growth rate, market position, profitability path | 5-20x revenue | Competition, market saturation |
| Later Stage | Profitability, cash generation, exit potential | 2-10x revenue | Market maturity, regulatory changes |
💰 Valuation Best Practices
- Use multiple valuation methods for triangulation
- Consider market conditions and investor sentiment
- Account for option pool dilution in calculations
- Benchmark against truly comparable companies
- Factor in control premiums and minority discounts
- Document valuation assumptions and sensitivities
Investment Terms and Deal Structures
Preferred Stock Terms
- Liquidation Preference: 1x non-participating, 1x participating, or multiple liquidation preference
- Dividend Rights: Cumulative or non-cumulative preferred dividends
- Voting Rights: Voting as converted or separate class voting
- Conversion Rights: Optional or mandatory conversion provisions
- Anti-Dilution: Weighted average narrow-based or broad-based protection
- Redemption Rights: Investor right to require share repurchase
Board and Governance Structures
- Board Composition: Founder, investor, and independent director seats
- Board Committees: Audit, compensation, and nominating committees
- Chairman Role: Founder, investor, or independent chairman
- Observer Rights: Non-voting meeting attendance and information access
- Voting Agreements: Coordinated voting on director elections
- Removal Rights: Ability to remove and replace directors
Protective Provisions and Veto Rights
- Major Corporate Actions: Mergers, asset sales, and liquidations
- Financial Matters: Budgets, debt financing, and major expenditures
- Equity Issuances: New securities, option grants, and dilutive transactions
- Strategic Decisions: Business plan changes and new business lines
- Related Party Transactions: Affiliate transactions and conflicts of interest
- Key Personnel: Hiring and termination of key executives
Transfer Restrictions and Liquidity Rights
- Right of First Refusal: Company and investor rights to purchase shares being sold
- Co-Sale Rights: Right to participate proportionally in founder stock sales
- Drag-Along Rights: Majority ability to force minority participation in sales
- Tag-Along Rights: Minority right to participate in majority sales
- Transfer Restrictions: Limits on share transfers to competitors or prohibited parties
- Lock-Up Periods: Restrictions on sales for specified time periods
⚠️ Deal Structure Considerations
- Balance investor protections with management flexibility
- Consider impact on future financing rounds
- Align liquidation preferences with expected exit scenarios
- Ensure anti-dilution protection doesn't discourage growth
- Plan for management equity incentive programs
Common Mistakes and Pitfalls to Avoid
For Companies/Founders
- Inadequate Legal Representation: Not engaging experienced securities attorneys
- Rushing the Process: Accepting terms without proper analysis and negotiation
- Overvaluation: Setting unrealistic valuations that create future down-round risks
- Excessive Dilution: Giving up too much equity too early in company development
- Weak Due Diligence: Inadequate preparation of company information and data room
- Misaligned Investors: Choosing investors who don't fit company stage or goals
- Incomplete Documentation: Missing key agreements or poorly structured equity plans
For Investors
- Insufficient Due Diligence: Not thoroughly investigating all aspects of the business
- Over-Aggressive Terms: Demanding terms that demotivate management team
- Inadequate Reserves: Not planning for follow-on investment needs
- Poor Reference Checking: Not thoroughly vetting management team and advisors
- Market Timing Issues: Ignoring market cycles and competitive dynamics
- Concentration Risk: Over-investing in single company or sector
- Exit Strategy Unclear: Not planning realistic exit timeline and methods
Documentation and Legal Issues
- Securities Law Violations: Improper securities filings or exemption compliance
- Tax Optimization Missed: Not structuring for optimal tax treatment
- International Complications: Inadequate planning for cross-border investments
- Conflicting Agreements: Inconsistent terms across different investment documents
- Inadequate Insurance: Missing key insurance policies and coverage
- Regulatory Compliance: Failure to comply with industry-specific regulations
🛡️ Risk Mitigation Strategies
- Engage experienced legal and financial advisors early
- Conduct thorough market and competitive analysis
- Create detailed financial models and sensitivity analysis
- Establish clear communication and reporting protocols
- Plan for multiple scenarios including best, base, and worst cases
- Build strong governance and decision-making processes
Investment Agreement Negotiation Strategies
Pre-Negotiation Preparation
- Market Research: Understand current market terms and standards
- Comparable Analysis: Research similar deals in your industry and stage
- Internal Alignment: Ensure founder and board alignment on key terms
- Advisory Team: Assemble experienced legal, financial, and strategic advisors
- BATNA Development: Identify best alternative to negotiated agreement
- Term Prioritization: Rank terms by importance and negotiation flexibility
Key Negotiation Points
- Valuation and Pricing: Pre-money valuation, option pool timing, and dilution
- Liquidation Preferences: Multiple, participation rights, and seniority
- Board Control: Seat allocation, voting rights, and committee structure
- Protective Provisions: Scope, thresholds, and sunset provisions
- Anti-Dilution: Protection type, carve-outs, and triggering events
- Drag/Tag Rights: Thresholds, exceptions, and process requirements
Negotiation Tactics and Approaches
- Interest-Based Negotiation: Focus on underlying interests rather than positions
- Package Deals: Trade multiple terms together rather than piecemeal
- Market Standards: Reference industry benchmarks and standard practices
- Conditional Terms: Link terms to performance milestones or time periods
- Sunset Provisions: Make onerous terms expire after specific events
- Creative Structures: Develop innovative solutions that benefit both parties
Common Negotiation Outcomes
| Term | Investor Preference | Company Preference | Common Compromise |
|---|---|---|---|
| Liquidation Preference | 2x participating | 1x non-participating | 1x participating with cap |
| Anti-Dilution | Full ratchet | No protection | Weighted average narrow-based |
| Board Control | Investor majority | Founder control | Balanced with independent tie-breaker |
| Protective Provisions | Broad scope | Minimal scope | Standard provisions with thresholds |
🤝 Successful Negotiation Principles
- Focus on long-term partnership rather than short-term wins
- Maintain transparent and honest communication
- Understand and address legitimate concerns of all parties
- Create win-win solutions that align incentives
- Be prepared to walk away if terms don't meet minimum requirements
- Document agreements clearly to avoid future disputes
Post-Investment Relationship Management
Ongoing Reporting and Communication
- Monthly Reports: Financial performance, key metrics, and operational updates
- Board Meetings: Quarterly strategic reviews and governance decisions
- Investor Updates: Regular communication on progress, challenges, and opportunities
- Annual Planning: Budget approval, strategic planning, and goal setting
- Major Decisions: Communication and approval process for significant changes
- Crisis Communication: Protocols for handling unexpected events or setbacks
Value-Added Services from Investors
- Strategic Guidance: Market insights, competitive intelligence, and strategic planning
- Network Access: Customer introductions, partnership opportunities, and talent recruitment
- Operational Support: Best practices, process improvement, and scaling guidance
- Follow-On Funding: Continued investment support and syndicate introductions
- Exit Preparation: M&A advisory, IPO preparation, and strategic buyer introductions
- Crisis Management: Turnaround expertise and restructuring guidance
Managing Investor Relations
- Regular Communication: Proactive updates and transparent reporting
- Expectation Management: Clear goal setting and performance tracking
- Issue Resolution: Early identification and collaborative problem-solving
- Board Dynamics: Effective meeting management and decision-making processes
- Stakeholder Alignment: Ensuring all parties remain aligned on strategy and goals
- Performance Reviews: Regular assessment of company and management performance
⚠️ Relationship Red Flags
- Poor communication and lack of transparency
- Misaligned expectations on strategy or performance
- Excessive micromanagement or interference
- Conflicts of interest or competing priorities
- Breach of fiduciary duties or contractual obligations
- Disagreements on exit timing or strategy
Exit Strategies and Liquidity Events
Types of Exit Strategies
- Initial Public Offering (IPO): Public listing on stock exchange
- Strategic Acquisition: Sale to strategic buyer or competitor
- Financial Buyer Acquisition: Sale to private equity or financial sponsor
- Management Buyout: Purchase by existing management team
- Secondary Sale: Sale to other private investors
- Recapitalization: Dividend recapitalization or partial liquidity event
IPO Considerations
- Market Conditions: Favorable public market environment and investor appetite
- Company Readiness: Size, growth, profitability, and governance requirements
- Regulatory Requirements: SEC compliance, financial reporting, and disclosure obligations
- Lock-Up Periods: Restrictions on insider selling post-IPO
- Underwriter Selection: Investment bank selection and syndicate formation
- Valuation Process: Roadshow, pricing, and allocation decisions
M&A Transaction Process
- Strategic Planning: Exit readiness assessment and preparation
- Buyer Identification: Strategic and financial buyer universe mapping
- Process Management: Auction process or negotiated sale approach
- Due Diligence: Management of buyer due diligence process
- Negotiation: Purchase price, terms, and closing conditions
- Closing Process: Regulatory approvals, financing, and transaction completion
Exit Planning Timeline
| Timeline | IPO Process | M&A Process | Key Activities |
|---|---|---|---|
| 12-18 Months Prior | Board consideration | Strategic review | Financial audit, governance cleanup |
| 6-12 Months Prior | Underwriter selection | Banker selection | Process preparation, material preparation |
| 3-6 Months | Registration filing | Buyer outreach | Due diligence, roadshow/data room |
| 1-3 Months | SEC review, pricing | Negotiations, LOI | Final negotiations, documentation |
| Closing | Public trading | Transaction close | Funding, integration planning |
🎯 Exit Success Factors
- Early and continuous exit readiness preparation
- Strong financial performance and growth trajectory
- Clean corporate structure and governance
- Market timing and favorable conditions
- Experienced advisory team and process management
- Stakeholder alignment on exit strategy and timing
Frequently Asked Questions
Investment rounds typically take 2-6 months from initial term sheet to closing, depending on several factors:
- Deal complexity: Simple seed rounds may close in 4-8 weeks, while Series A+ rounds often take 3-6 months
- Due diligence scope: More extensive due diligence requires additional time
- Number of investors: Syndicated rounds with multiple investors take longer
- Documentation complexity: New investor rights and complex structures extend timelines
- Regulatory requirements: Securities filings and approvals may add time
The difference relates to how preferred stockholders receive proceeds in a liquidity event:
- Non-participating preferred: Investors choose between their liquidation preference OR converting to common stock and sharing pro-rata in remaining proceeds (whichever is higher)
- Participating preferred: Investors receive their liquidation preference PLUS participate pro-rata with common stockholders in remaining proceeds
- Capped participation: Participation rights cap at a multiple (e.g., 3x) of the original investment
Participating preferred provides better downside protection and upside participation for investors but reduces returns for common stockholders.
Venture capital is most appropriate when:
- High growth potential: Business model supports rapid scaling and large market opportunity
- Capital intensive: Significant funding needed for product development, market expansion, or team building
- Strategic value-add: Investors can provide valuable expertise, networks, and guidance
- Exit potential: Clear path to liquidity through IPO or acquisition
- Risk tolerance: Founders comfortable with dilution and investor involvement
Alternative funding sources like debt, revenue-based financing, or bootstrapping may be preferable for profitable businesses with lower growth ambitions or founders who want to retain more control.
Anti-dilution provisions protect investors from dilution when a company issues shares at a lower price than the investor's original purchase price:
- Weighted average (broad-based): Adjustment considers all outstanding shares including options
- Weighted average (narrow-based): Adjustment considers only common stock and preferred stock
- Full ratchet: Conversion price adjusts to the new lower price regardless of quantity issued
Example: If an investor paid $2.00/share and the company later issues shares at $1.00/share, the anti-dilution provision would adjust the investor's conversion price downward, giving them more shares upon conversion to compensate for the dilution.
A complete investment round typically includes:
- Term Sheet: Non-binding summary of key investment terms
- Stock Purchase Agreement: Main investment contract with terms and conditions
- Certificate of Incorporation (Amended): Updated to reflect new preferred stock rights
- Investors' Rights Agreement: Information rights, registration rights, and other investor protections
- Voting Agreement: Voting arrangements for director elections
- Right of First Refusal Agreement: Transfer restrictions and co-sale rights
- Management Rights Letter: Investor inspection and information rights
- Board Resolutions: Corporate authorizations for the investment
These rights govern what happens when major stockholders want to sell their shares:
- Drag-along rights: Allow majority stockholders to force minority stockholders to participate in a sale on the same terms. This ensures buyers can acquire 100% of the company without holdout problems.
- Tag-along rights: Allow minority stockholders to participate in a sale initiated by majority stockholders. This protects minorities from being left behind in partial sales.
Example: If founders holding 60% want to sell to a buyer who requires 100% ownership, drag-along rights let founders force minority investors to sell. Conversely, if major investors want to sell their stake, tag-along rights let founders participate in the sale proportionally.
Download Investment Agreement Template
Our comprehensive investment agreement template includes all essential provisions for startup funding, venture capital investments, and private equity deals. The template is designed by legal experts and includes:
- Complete investment agreement with all standard provisions
- Customizable terms for different investment stages and structures
- Detailed instructions and commentary for each section
- Alternative provisions for different scenarios
- Ancillary documents including term sheet template
- Compliance guidance for securities law requirements
⚖️ Legal Disclaimer
Important: This template is provided for educational and informational purposes only and does not constitute legal advice. Investment agreements involve complex legal and regulatory requirements that vary by jurisdiction, investment type, and specific circumstances.
Always consult with qualified securities attorneys and other professional advisors before using any investment agreement template. The template should be customized for your specific situation and reviewed by experienced legal counsel to ensure compliance with applicable laws and protection of your interests.
MyPitchDecks.com makes no warranties regarding the completeness, accuracy, or suitability of this template for any particular purpose and disclaims all liability for any damages arising from its use.