SAFE agreements have a lot to offer. But what benefits the startup, such as the lack of standardization, can also hurt the startup if the contract is not developed and negotiated in a professional and strategic manner. If you are a start-up and looking for alternative and creative ways to find investors, contact Mohsen Parsa today. Mohsen Parsa, a los Angeles start-up lawyer, helps clients understand SAFE agreements, design comprehensive SAFE agreements for clients, and provide general guidance and guidance to these types of agreements so that startup clients can make the best short- and long-term decisions. Here`s a look at SAFE agreements and why they`re important to startups, but if you have specific questions about your SAFE agreements or how to conclude these types of agreements, contact Parsa Law, Inc. A largely erroneous belief is that SAFes are standardized. Although YCombinator, the seed accelerator that created SAFEs, has published standardized versions of the agreements on its website, these documents can and will be modified by issuers. A lawyer is in the best position to check SAFE to advise the investor on the effects of the specific document, for example.B. (1) conversion conditions, including the amount and conditions of conversion and probability of conversion; (2) the company`s repurchase rights and whether the company may be able to prevent the conversion of the investment in exchange for the investor`s purchase of SAFE; (3) dissolution rights in the event of a bankruptcy filing of the company prior to the transformation; and (4) voting rights, if they exist, are granted to the investor.
A SAFE is an agreement between you, the investor, and the company in which the company usually promises to give you a future stake in the business if certain triggering events occur. Not all FAS is the same and the very important conditions for obtaining future equity may vary depending on the SAFEs offered in different crowdfunding offers. Despite its name, a SAFE should not be “simple” or “safe.” In the meantime, a SAFE that has not matured is treated like any other convertible security (for example. B, warrants or options). The SEC`s Office of Investor Education and Advocacy publishes this Investor Bulletin to inform investors about a type of guarantee, often referred to as “SAFE” (a “simple agreement for future capital”), that can be offered through crowdfunding offers. As a start-up, you come in agreement with other companies, suppliers, contractors, investors and many others. A lesser-known agreement is the Simple Agreement for Future Equity (SAFE). These agreements can be important for the success of a startup, but not all SAFE agreements are equal. At the end of 2013, Y Combinator published the Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt.
[2] This investment vehicle is now known in the U.S. and Canada because of its simplicity and low transaction costs. However, as use is increasingly frequent, concerns have arisen about its potential impact on entrepreneurs, particularly where several SAFE investment cycles take place prior to a private equity cycle[4] and potential risks to un accredited crowdfunding investors who could invest in the SAFes of companies that realistically, never receive venture capital financing and therefore never convert to equity. [5] To complicate matters a little, a SAFE will sometimes have a discount.
