SAFE Y Combinator Docs are used by startups to raise capital during their seed financing. Speak with a LawTrades to get it customized or reviewed before signing.
– Ensure compliance
– Save money long term
– You get much more
What you need when raising capital
A SAFE (Simple Agreement for Future Equity) is a financing contract used by companies to raise capital in their seed financing rounds. A SAFE aims for long term stabilization by eliminating those features that make convertible debt risky. Unlike convertible notes, SAFEs are not a debt instrument and lack both a maturity date and an interest rate. SAFE agreements were created by Y Combinator and are intended to be simple and fair to both investors and founders, while preserving the flexibility of convertible notes. There are four versions of a SAFE and each are meant to be short and usually around five pages in length. This saves startups and investors a ton of time and legal fees on hammering out the details of a SAFE, but it’s always smart to have a simple agreement lawyer take a look before you sign.
Confirm best form of funding
There are other attractive options for companies – like KISS documents and convertible notes – and a simple agreement lawyer can assess if those sources suit your business better or using SAFE Y Combinator docs.
Assurance you’re doing it right
Although a SAFE is meant to be simplistic, there are still mistakes to make. Also, it’s nice hearing from a simple agreement lawyer that the proposed terms of the agreement are fair and enforceable.
You have an attorney to turn to
There’s a good chance you’re going to like your simple agreement lawyer from LawTrades and want to keep using them. By setting up that relationship for SAFE Y Combinator Docs, you have a legal expert to turn to when in need.
What’s the difference between convertible notes and SAFEs?
SAFE Y Combinator Startup Documents is like a convertible note in that the investor buys not stock itself, but the right to buy stock in an equity round when it occurs. A SAFE can have a valuation cap, or be uncapped, just like a note. However, unlike debt, a SAFE requires no fixed term or an interest rate. The overall setup of a SAFE requires less paperwork and formalities as well.
Can all types of businesses utilize SAFE documents?
No. One drawback of a SAFE agreement is that it requires a company to be incorporated, thereby restricting early stage LLCs from taking advantage of this agreement.
What are the different types of SAFEs?
There are four different versions of SAFEs: 1) Cap, no Discount; 2) Discount, no Cap; 3) Cap and discount; and 4) “Most Favored Nation” with no cap or discount.
What is a valuation cap? What is a discount?
A valuation cap (“cap”) entitles SAFE holders to convert into equity at the lower of the valuation cap or the price in the subsequent financing. A discount allows early investors the opportunity to purchase preferred stock at a cheaper rate at a future financing round.
What does a “Most Favored Nation” mean?
A most favored nation clause (also referred to as a “MFN clause”) allows a SAFE investor to elect more favorable terms that are offered to any subsequent investors following the original investor’s investment and prior to a next equity round.
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