Nebraska Term Sheet - Simple Agreement for Future Equity (SAFE)

State:
Multi-State
Control #:
US-ENTREP-008-1
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.

In 2020, the number of non-convertible notes (e.g., SAFE notes and KISS notes), used by pre-funding companies is just as prevalent (58%) as the number of convertible debt notes issued.

If a company fails to secure future equity financing or get acquired, then an investor's SAFE will never convert into equity. The SAFE holder will be entitled to repayment in a dissolution of the company, although it's likely there won't be meaningful assets left to pay the SAFE holder in that scenario.

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.

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.

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.

SAFE (or simple agreement for future equity) notes are financial agreements that startups often use to help raise seed capital. Essentially, a SAFE note acts as a legally binding promise to allow an investor to purchase a specified number of shares for an agreed-upon price at some point in the future.

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.

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Nebraska Term Sheet - Simple Agreement for Future Equity (SAFE)