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SAFE Investing: Startup Financing 101

SAFE Investing

  • Simple Agreement for Future Equity
  • It is only a five page document that was created for the purpose of simple seed investment on startups
  • A financing tool that provides a lower cost and speedier alternative to convertible debt financing.
  • This is the right to obtain a preferred stock of a firm
  • Created by Y Combinator
  • 4 variations of SAFE: cap and no discount, discount and no cap, cap and discount, no cap or discount
  • If there is an acquisition or IPO the SAFE holder can get money back or convert holdings to common stock
  • There is a SAFE MFN option meaning that if a holder gets certain terms and later investors get better terms, the MFN kicks in and the SAFE holder will get the terms amended to the better terms.
  • Still covered by securities laws
  • It goes on your cap table just like a warranty or option
  • SAFE only allows for conversion to the next round of financing
  • SAFE allows for a one time payout or conversion of equity
  • SAFE is not a debt instrument and is instead defined as a type of warranty and therefore has no interest rate
  • Also has no maturity date
  • The most alike financing tool to SAFE is a convertible note but a convertible note is a debt instrument with a maturity date and interest rate while SAFE has none of that, it is a simpler financing tool.
  • Websites I used: http://www.spitzbusinesslaw.com/blog/safe-a-new-financing-tool-for-startups/ https://shockwaveinnovations.com/2013/12/21/reviewing-the-new-safe-investment-instrument/ https://blog.indinero.com/seed-investment-7-ways-to-compare-safe-to-convertible-notes/
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BEYourStart in Saratoga Springs for Startup Saratoga October 11, 2017

Robert Braathe of BEYourStart Startup Accelerator will be attending the Startup Saratoga event on Wednesday October 11th.

Braathe Enterprises, based in Saratoga Springs since 2008 and founded in 2005, has provided consulting and training for entrepreneurs and business leaders in a variety of industries including IT, e-commerce, hospitality, not-for-profits and consumer products.

He most recently worked with startups this summer as an Entrepreneur In Residence at a startup accelerator in Troy, NY.

Meet Robert at this event or contact him at 518-290-0812 for more information.