SAFE is an agreement used by startups mainly to raise funds during their seed financing rounds. By using a SAFE, investors invest capital in the company, which converts into equity upon certain trigger events, most commonly a subsequent financing round. A SAFE could contain investor-“friendly” economic mechanisms, such as discount and valuation cap, the first … Read more Purpose of Valuation Cap in SAFE
Raising funds during the early stage can be challenging and time-consuming for startups, but that’s when SAFE comes to the rescue. SAFE provides a way to raise capital in a relatively fast fashion, providing efficient and practical solution in funding phases that usually lack certainty. Y Combinator introduced SAFE as an alternative for convertible notes. … Read more Essential Features of SAFE
Meaning of Pro-Rata Participation Rights Pro-rata participation rights, also known as pro-rata investing rights, or preemptive rights, grant existing shareholders or investors in convertible instruments such as SAFE, the right to participate in subsequent fundraising rounds. The right allows them to maintain, and sometimes to increase, their percentage ownership in the entity. The right is … Read more Pro-Rata Participation Rights – What does it mean and what should you pay attention to?
SAFE and Convertible Notes are the two most preferred investment options popular among startup founders and investors during seed funding rounds. SAFE is basically an agreement that startups use to raise seed funding which in turn allows investors to buy equity at a later stage. On the other hand, convertible notes are considered short-term debt … Read more SAFE v. Convertible Notes/CLAs: The Key Differences