What is an example of a SAFE Simple Agreement for Future Equity?

SAFE Example The SAFE investor would receive 6,250 shares under the 20% discount rate term in their agreement, or 15,000 shares if they had a valuation cap of $4 million. If an Investor had both features included in their SAFE agreement, the investor would likely choose the valuation cap and receive 15,000 shares.

What is an example of a SAFE agreement?

SAFE Example The SAFE investor would receive 6,250 shares under the 20% discount rate term in their agreement, or 15,000 shares if they had a valuation cap of $4 million. If an Investor had both features included in their SAFE agreement, the investor would likely choose the valuation cap and receive 15,000 shares.

What are standard SAFE note terms?

Determine the key terms of your SAFE notes. This includes the amount being raised (or the "raise goal"), the valuation cap, and the discount rate. You'll also want to specify trigger events and investor rights. Best if you get input from your legal counsel when defining these terms.

Is a SAFE agreement debt or equity?

Are SAFE Notes Debt? No, SAFEs should not be accounted for as debt but instead as equity. Experienced venture capitalists expect to see SAFE notes in the equity section of a company's balance sheet - therefore, they should be classified as equity, not debt.

Can an LLC use a safe agreement?

Yes, an LLC can issue a SAFE note. The standard agreement would likely need modifications, though, and there are potential risks around tax treatment uncertainty that LLC owners should review with their legal counsel.

What is the discount rate for the Simple Agreement for Future Equity?

The Discount Rate is calculated as 100% minus the percent discount the SAFE investors are entitled to. For example, if SAFE investors are entitled to a discount of 20% (they can buy Standard Preferred Stock 20% cheaper than subsequent investors), the Discount Rate is 80% [= 100% - 20%].

What is the discount rate in a SAFE agreement?

The SAFE note discount rate lies between 5% to 30%. A 20% discount is written as 80%, and a 10% discount is written as 90%. Some investors might employ a valuation cap in SAFE to safeguard their interests if the firm is expanding rapidly or obtain a safe note discount.

How to write a safe agreement?

How to negotiate a SAFE agreement Understand the terms and conditions. Create a term sheet that outlines the conditions you're willing to accept and those you want to negotiate. Align interests with investors. Find investors who offer more than just capital. Come in with a plan. Focus on building relationships.

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