What Is A Safe Investment Agreement

If the business fails, the remaining money will be returned to the investors. If you are the founder, this does not mean that you must repay the money if the company fails. Responsibility lies with the company, not the founder. Whether you`re using the safe for the first time or are already familiar with safes, we recommend reading our Safe User Guide. The Safe User Guide explains how the safe converts with sample calculations, as well as other details on the secondary letter pro-rata, explanations of other technical changes we made to the new safe (for example. B the language of tax processing) and suggestions for optimal use. There are four versions of the new post-money safe as well as an optional letter of receipt. Our updated safes are post-money safes. By “post-money” we say that the safe owner is measured by post, all the safe money is accounted for – which is now his own trick – but before (before) the new money in the price cycle that transforms and dilutes the coffers (normally series A, but sometimes the Seed series). The post-money safe has what we think is a great advantage for founders and investors – the ability to calculate immediately and exactly how much property the company has been sold. For the founders, it is essential to understand how much dilution is caused by each chest they sell, just as it is fair for investors to know how much they have bought ownership of the business.

A SAFE is a simple agreement with a document that helps startups avoid many of these problems. Unlike a change in sola, it is not debt and it does not come with interest or a due date. The valuation of the company is thus postponed to a later date, so that the founders are not required to accept the lower rating that is accompanied by a start-up capital financing cycle. Another new function of the safe concerns a “prorgula” right. The original safe required the company to allow holders of safes to participate in the financing round after the financing round in which the safe was converted (for example. B if the safe is converted into series group preferred actuators, a secure holder – now holder of a Series A preferred share subseries – is allowed to acquire a proportionate portion of the Series B preferred share). While this concept is consistent with the original concept of safe, it made no sense in a world where safes were becoming independent funding cycles. Thus, the “old” pro-rata right is removed from the new safe, but we have a new model letter (optional) that offers the investor a proportional right in the preferential financing of Series A on the basis of the converted safe property of the investor, which is now much more transparent. Whether a start-up and an investor enter the letter with a safe will now be a choice that the parties will choose, and this may depend on a large number of factors.

Factors to consider can (among other things) the amount of the safe purchase and the amount of future dilution that proportional duty can cause to the founders – an amount that can now be predicted with much greater accuracy if post-money safes are used. It still allows high-resolution fundraising. Startups can enter into an investor as soon as both parties are ready to sign and the investor is willing to side up with money instead of trying to coordinate a single deal with all investors at the same time. In fact, it could be much easier now that founders and investors have more security and transparency in what each party gives and receives. Although the safe may not be suitable for all financing situations, conditions must be balanced with the interests of the start-up and investors in mind. As with the original safe, there are always trade-offs between simplicity and completeness, so that while not all Edge cases are addressed, we believe that the safe covers the most per-per-