Angel investors take a much higher initial risk with any startup and for that reason they deserve to have a higher upside potential when compared to investors coming in the future rounds. On the other hand, entrepreneurs should not agree with the terms of a convertible note that will make it hard to raise money in the next round. What terms should a convertible note include so the angel investors, entrepreneurs and future round investors are happy?
The terms of any investment are unique to each company. So it's hard to answer your question in generalities. That said, for Silicon Valley companies, convertible notes usually have a cap set at $4-5m with a discount that is either set (15%) or that is determined by a factor of time. I've seen North American companies at a similar early stage that are outside of the valley raise at as low as 3m cap.
Generally speaking, every round of funding is usually a 10-20% dilution, sometimes as much as 25%.
You want to use standard docs, and not complicate anything. Happy to talk through your specific situation and tell you what I think would be fair for both parties.
Fair is subjective. Without a cap of some type - the entrepreneurs generally get a better deal because the valuation is completely at the determination of future investors. With a higher discount, liquidation preferences, cap, protective covenants, tend tilt the scales towards a favorable deal for investors. SAFE notes created by Y-combinator tend to solves many of these issues.
Do not use a convertible note. Widespread as it's use is, what is critical is alignment of incentives between the parties.
Both should be clear with themselves and the other, what their target return is; for angels a multiple of the amount invested; and for founders the increase in net worth they seek as a result of the businesses success.
Fair has nothing to do with it. The word is a smoke screen for lack of hard thinking about whether or not there is a basis for a deal between the parties.