Simple Agreement For Future Equity Company

These three points can help attract investors to the company. They also carry less risk, often associated with other types of investments. In addition, SAFEs are a kind of problem solver for start-ups. There are a few specific issues that are resolved and these are briefly addressed below. The SAFE is a kind of warrant that gives investors the right to obtain shares of the company, usually preferred shares, if and if there is an upcoming valuation event (i.e. the next time the company increases, acquires “valued” equity or submits an IPO). If angels make a lot of money with a market, it`s not because they invested with a valuation of $1.5 million instead of $3 million. That`s because the company has really succeeded. In exchange for capital, LES SAFEs recalls the agreement concluded with the investor according to which, during a subsequent financing round, a change of control of the company or the IPO of a company, the amount of the SAFE investment will be converted into equity of the company. Although they are similar in function, they differ from convertible bonds in that the amount invested under a SAFE is not a debt that represents interest or requires a monthly payment, does not yet have a maturity date. This is not a direct stake in the company, but a promise that the amount of the investment will be converted into equity in the future. This aspect of SAFEs puts investors in front of a fundamental concern.