Connecticut Simple Agreement for Future Equity (SAFE) is a legal contract often used by early-stage startups and investors to establish a framework for investment. It allows startups to raise funds in exchange for future equity, without specifying the exact valuation or share price at the time of investment. The Connecticut SAFE agreement is designed to provide a transparent and mutually beneficial investment structure. By utilizing this agreement, both startups and investors can mitigate risks associated with traditional equity arrangements. SAFE agreements offer flexibility and simplicity in fundraising, enabling startups to attract investments while postponing the determination of valuation until a later funding round or defined milestone. Connecticut SAFE agreements typically include key provisions such as: 1. Conversion Rights: This establishes the terms of converting the investment into equity shares in future financing rounds or specified triggers, such as an acquisition or IPO. 2. Valuation Cap: The agreement may include a maximum valuation cap, ensuring that investors are not disadvantaged if the company achieves a higher valuation in subsequent funding rounds. 3. Discount Rate: A discount rate may be determined to reward early-stage investors by granting them a lower share price compared to subsequent investors in future financing rounds. 4. Trigger Events: These are events that may lead to the conversion of the SAFE agreement into equity. Common trigger events include the closing of a specified funding round, an acquisition, or an IPO. 5. Termination Events: The agreement may outline circumstances where the SAFE agreement terminates prematurely, which could include bankruptcy, liquidation, or change of control. Different variations of the Connecticut SAFE agreement may exist, depending on the specific requirements of the parties involved, including investors, startups, and legal advisors. These variations might include customized terms, different conversion rights, or additional protective provisions to safeguard investor interests. In summary, the Connecticut Simple Agreement for Future Equity is a flexible investment instrument that allows startups to raise funds quickly without needing to determine the exact valuation at the time of investment. It provides a win-win scenario for both startups and investors by establishing conversion rights, valuation caps, discount rates, and trigger events.