- promissory note
- cumulative convertible preferred stock position
- or the creation of a common voting equity right.
Other angels are interested in taking a cumulative convertible preferred stock position. This scenario allows the start-up to defer fixed cash dividends for a set time period.
Investors seeking a more active role may ask for common equity. This enables the angel to take a place on the board of directors and allows for much more active participation in company . An arrangement such as this works well for angel investors who are keenly interested in hands-on involvement in the business.
During contract negotiations, an entrepreneur must decide what percentage of equity he or she is willing to part with and how that will affect the venture in the future.
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