What happens when a SAFE converts?

A SAFE converts into shares at pre-agreed trigger events. These trigger events are usually: a ‘qualifying round’ (where the company raises a round of equity investment through the issue of shares to investors); or. an ‘exit event’ (where a company sells its shares or assets, or lists on a stock exchange).

What happens in a down round?

A down round refers to a private company offering additional shares for sale at a lower price than had been sold for in the previous financing round. Simply put, more capital is needed and the company discovers that its valuation is lower than it was prior to the previous round of financing.

What is SAFE startup?

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.

What is SAFE round?

The SAFE investor receives the future shares when a priced round of investment or liquidity event occurs. SAFEs are intended to provide a simpler mechanism for startups to seek initial funding than convertible notes.

What is down round in startup?

Down round refers to a scenario where the value of a business at a time of investment is below the value of the same business during a previous period or financing round. Normally during a down round, investors purchase equity in the business at a lower price, in comparison to previous investors.

What does it mean to raise a SAFE?

Sep 5, 2017. A SAFE is a relatively simple document that startups commonly use to raise seed capital. A SAFE is a promise to issue a certain number of shares in the future – “Simple Agreement for Future Equity”. Unlike a convertible note, a SAFE is not debt, and so it has no deadline for repayment and no interest rate.

How to raise a seed round for Your Startup?

When it comes down to how to raise a seed round, keep in mind that startups with one founder do succeed, so if you’re on your own, don’t let that put you off from chasing your business goals. However, an analysis of 549 successful companies, shows that startups with two founders are 30\% more likely to succeed.

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.

How many investors does it take to raise a seed-funded company?

Generally, more than one investor take part in the Series A stage with one leading the round with most funding. But according to CB Insights, only 46 percent of seed-funded companies raise another round.

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.