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What is a SAFE (Simple Agreement For Equity) and how do I use it for Seed Financing?

A SAFE is essentially an agreement that is similar to a warrant that entitles investors to shares in the company at a future date. Many businesses are turning to this solution during the pre-revenue stage of business for a few key reasons:

  • This agreement is fairly simple in comparison to other business documents (which is not only attractive to founders, but investors alike)
  • The agreement doesn’t require specific valuations or share prices as those can be decided at a later date once the company gains more revenue
  • It can include special deals and discounts to earlier investors that are taking a bigger risk during the initial stages of business
  • SAFE doesn’t involve debts or maturity dates which can also be an attractive asset to investors

Because of the points discussed above, seed funding is made easier through this type of agreement.

While there is a simplicity associated with a SAFE agreement, you shouldn’t avoid the assistance of a start-up attorney as they can help ensure that you have included the proper information and assist you with other areas of business development.

LawTrades has assisted over 1000 entrepreneurs with various aspects of their business. We would be happy to connect you with a skilled business attorney that can do the same for you. An attorney can help customize your SAFE agreement or simply offer guidance before you sign. Contact us today to discuss your options.

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