Maine Term Sheet - Simple Agreement for Future Equity (SAFE)
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How to fill out Term Sheet - Simple Agreement For Future Equity (SAFE)?
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FAQ
A safe (Simple Agreement for Future Equity) term sheet is a type of investment instrument used in early-stage startup funding. It allows investors to provide capital to a startup in exchange for the right to receive equity at a later date.
Is a SAFE Note a Loan? 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.
Term sheets are also often used for SAFE or convertible note rounds, but are used less frequently than for priced rounds because of the relative simplicity of SAFE and convertible note legal documents.
SAFE Note Example For example, an investor purchases a SAFE note from your startup with a valuation cap of $10M. Your company's value is set at $20M at $10/share during the subsequent funding round. The SAFE note will convert based on the valuation cap of $10M.
How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.
In a Liquidity Event, a safe holder is entitled to receive a portion of the proceeds equal to the greater of (1) a return of its Purchase Amount and (2) the as-converted proceeds it is entitled to in connection with a Liquidity Event (i.e., the proceeds it would be entitled to had its Purchase Amount been converted ...
A SAFE note term sheet is a legal document that aligns early-stage startup funding interests by outlining the key investment agreement terms for entrepreneurs.
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.