Delaware Simple Agreement for Future Equity

State:
Multi-State
Control #:
US-ENTREP-008-3
Format:
Word; 
Rich Text
Instant download

Description

This term sheet summarizes the principal terms of the proposed Simple Agreement for Future Equity ("SAFE") financing of a Company, by certain Investors. This term sheet is for discussion purposes, is not binding on an Investor, nor is an Investor obligated to consummate the financing until a definitive SAFE agreement has been agreed to and executed. The term sheet does not constitute an offer to sell or an offer to purchase securities.
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FAQ

No, a SAFE note is not a loan or debt, it is accounted for an equity on the balance sheet. Unlike convertible debt - or pretty much any debt, it does not have an interest rate nor does it have a maturity date. Accounting for SAFE notes - Kruze Consulting Kruze Consulting ? ... ? SAFE Notes Kruze Consulting ? ... ? SAFE Notes

Cons: SAFE investors assume most, if not all, of the risk, in that there is no guarantee of any equity ownership in the company. ... A SAFE holder is not entitled to any company assets in the event of a liquidation. SAFEs: The (Not So) Simple Agreement for (Potential) Future ... mintz.com ? insights-center ? viewpoints ? 2... mintz.com ? insights-center ? viewpoints ? 2...

A simple agreement for future equity (SAFE) is a financing contract that may be used by a start-up company to raise capital in its seed financing rounds. The instrument is viewed by some as a more founder-friendly alternative to convertible notes because a SAFE is quicker and easier to negotiate and has fewer terms. Simple agreement for future equity (SAFE) - Practical Law thomsonreuters.com ? ... thomsonreuters.com ? ...

A SAFE is an investment contract between a startup and an investor that gives the investor the right to receive equity of the company on certain triggering events, such as a: Future equity financing (known as a Next Equity Financing or Qualified Financing), usually led by an institutional venture capital (VC) fund.

Suppose a SAFE is issued with a 20% discount. This means if the SAFE investor invested $40,000 in a startup whose price per share at the time of future investment comes out to be $10, he'll get the share at a 20% discounted price, which is $8. This means he'll get 5000 shares instead of 4000. What Is Simple Agreement for Future Equity (SAFE)? - Feedough feedough.com ? what-is-simple-agreement-f... feedough.com ? what-is-simple-agreement-f...

In the case of SAFE notes, they typically convert into equity at a future financing round or acquisition event based on a predetermined formula. On the other hand, convertible notes have a predetermined conversion ratio or price, allowing them to convert into equity at a specified conversion event.

A SAFE is an agreement to provide you a future equity stake based on the amount you invested if?and only if?a triggering event occurs, such as an additional round of financing or the sale of the company.

Interest rate: Convertible notes function as a debt instrument. They have an interest rate attached like any other loan. However, in this case, the ?interest? is paid in the form of business equity, rather than cash.

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Delaware Simple Agreement for Future Equity