Simple Agreement for Future Equity (SAFE): An Overview

AUTHOR: Kyle Rose LinkedIn Logo

  • Investment Amount: The cash amount which the investor agrees to immediately give to the company
  • Investment Date: The date on which this transfer will occur
  • Valuation Cap: The maximum company valuation at which the equity exchange may occur (this provides enhanced upside potential to investors if the future equity financing occurs at an elevated price)
  • Discount: The discount to the price per share of a future equity raise at which the SAFE will convert (if there is both a discount and a valuation cap, the more favorable to the investor is generally applied)
  • Most Favored Nation (MFN) Clause: The MFN clause allows for a grandfathering of terms if any additional SAFEs or Convertible Notes are issued with more favorable terms prior to a priced equity round
  • Investment Amount: $50k
  • Investment Date: May 1, 2021
  • Valuation Cap: $7MM
  • Discount: 10%
  • Most Favored Nation clause included
  • Exchangeable for preferred equity
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