Table of Contents
- 1 How does a pre money SAFE convert?
- 2 How does SAFE convert to equity?
- 3 Is SAFE pre-money or post-money?
- 4 What is a SAFE funding round?
- 5 What is SAFE preferred stock?
- 6 Are safe notes the best option for seed money?
- 7 What is the best security for raising seed rounds?
- 8 Should I use the safe to raise my first seed capital?
How does a pre money SAFE convert?
Basically, it’s an agreement in which an investor gives you money for your company now, with the expectation that you’ll convert that amount of money into shares of stock later on. That means that SAFEs usually require much less paperwork and negotiation than issuing shares of stock right away.
How does SAFE convert to equity?
Because of this, I want my SAFE to “convert” into equity at a later stage. Basically, once someone decides to invest in the company in a “priced round,” my SAFE will turn into shares in the company. If I invest $20,000 through a SAFE, the company will then use that money to build the business.
What is a SAFE round?
A SAFE or safe stands for a “simple agreement for future equity”. In exchange for the money, with a SAFE, the investor receives the right to purchase stock in a future equity round (when one occurs) subject to certain parameters set in advance in the SAFE.
Is SAFE pre-money or post-money?
The valuation cap in the new SAFE is post-money (as opposed to pre-money). For a company raising just one SAFE round, there’s effectively no repercussions: an investor willing to invest $2M on $8M pre-money is presumably willing to invest $2M on $10M post-money, with the same resulting ownership of 20\%.
What is a SAFE funding round?
A simple agreement for future equity (SAFE) is an agreement between an investor and a company that provides rights to the investor for future equity in the company similar to a warrant, except without determining a specific price per share at the time of the initial investment.
How do SAFE convert?
When a SAFE converts, the conversion price is calculated by dividing the valuation cap by the company’s capitalization (the total number of shares and options). With a pre-money SAFE, the company capitalization consists of all its shares and options, not including shares issued when the SAFE converts.
What is SAFE preferred stock?
Safe Preferred Stock means the shares of a series of Preferred Stock issued to the Investor in an Equity Financing, having the identical rights, privileges, preferences and restrictions as the shares of Standard Preferred Stock, other than with respect to: (i) the per share liquidation preference and the conversion …
Are safe notes the best option for seed money?
When seeking seed money, it’s typically best to choose the option that is most popular in your community so investors will feel comfortable. To decide whether SAFE notes are for you, take some time to weigh the pros and cons. Benefits of SAFE notes include: Simplicity: A SAFE note is simpler than a convertible note.
What is a safe as a seed investment?
Definition of SAFE as Seed Investment. SAFE is an acronym that stands for “simple agreement for future equity” and was created by the Silicon Valley accelerator Y Combinator as a new financial instrument to simplify seed investment. At its core, a SAFE is a warrant to purchase stock in a future priced round.
What is the best security for raising seed rounds?
In Silicon Valley, the SAFE (promoted by Y Combinator) has become the dominant security for raising seed rounds. It is effectively a convertible note without a maturity date or interest, with a few flavors.
Should I use the safe to raise my first seed capital?
Since then it has become the predominant method for YC companies to raise their first seed capital. And, by using the SAFE they have raised capital at virtually no legal cost – the SAFE is a 4 page document! And, hundreds of millions of dollars of capital have gone into startups already using SAFEs.