The National Angel Organization's free online book, Age Of The Angel: Best Practices For Angel Groups is a worthwhile read for entrepreneurs who expect to be dealing with angel groups, or even (although to a lesser degree) with individual angels. The appendicies with a sample term sheet and a sample shareholder's agreement are worth reading by themselves (and we hope to add other samples to the WatStart site soon).

At the same time, it's also a reminder of many of the things I can't stand about angel groups. There's more than a whiff of self-importance in the tone of the writing and the book promotes as "best practices" actions that would only strain the relationships between angels and entrepreneurs.

It encourages angels to take preferred shares, rather than common (something that even Waterloo-based VC firm Tech Capital Partners prefers not to do) and promotes the inclusion of liquidation preferences and ratchets in the term sheet.

For hubris, it's hard to beat this passage from page 69:

The other issue that Angels often run into is the false notion by founders that they, as the sellers, set the price. In reality, it's the "Golden Rule" that comes into play. He who has the gold makes the rules.

In the Waterloo area, we've been fortunate to have a very active angel community, and a core group of angels that really want to see companies succeed and entreneurs be successful. Not all of our angels are easy to work with, but I think we score pretty well compared to other centres. Thankfully, we rarely see demands for prefs and ratchets here (I never have with the angel deals I've seen, but I imagine it's happened) and it would be unfortunate if some of the less entrepreneur-friendly terms being promoted by the NAO were to find their way here.

I think it's in our favour that we don't have an angel group here. There briefly was one, in theory at least, but it quickly died. Angel activity has only increased since then.