Startup accelerator Y Combinator (commonly referred to simply as "YC") released a set of financing documents (referred to as "Safe", or "Simple Agreement for Future Equity"), which have become widely used as an instrument for raising early stage capital in Silicon Valley. What is a SAFE agreement in VC funding? | AbstractOps How do SAFEs and convertible notes convert in a priced ... You can now use this calculator to see how dilutive raising SAFEs will be dependent on your series-A. Australian translation of Y-Combinator's Simple Agreement ... That being said, as is customary in Silicon Valley, it metamorphoses. SAFE Calculator for the Y-Combinator Post Money SAFE This document is intended only for US companies. You don't have to negotiate all the details you'd have to if you sold stock to an investor. . the SAFE note is also intended to be used when a company is raising seed capital from a third party investor in the form of a convertible instrument. Obtaining initial financing can be a major issue for early stage and startup companies. Y Combinator initially developed the SAFE for investing under Regulation D offerings. There are two main forms of note used in Southeast Asia: the KISS-style note used by 500 Startups, and the SAFE note based on the note developed by Y Combinator. . Unlike convertible notes that usually come with a 12-18 months maturity (sometimes 24 months), startups don't have the pressure to raise a priced equity round in the short term. SAFE (simple agreement for future equity) notes are a simpler alternative to convertible notes. These agreements are not strictly a legal document and the terms vary with jurisdiction. In December 2013, Y-Combinator announced the Safe, a Replacement for Convertible Notes via their terrific blog post written by Paul Graham. As pointed out in the definition, convertible notes can be intricate and lengthy. Post-Script: After requests from a number of readers, I've posted a template convertible note based on the template we've used hundreds of times across the country. I'm working on making navigation more of a pleasure for you. Historically the way to do that was using a Convertible Loan Note. Background reading: Why Startups Shouldn't Use Post-Money SAFEs As we've written previously, the Post-Money SAFE template published by Y Combinator has dramatically worse economics for founders and common stockholders than it should, but it has been getting lots of promotion from the investor community because of how favorable it is to them. Click here to use the Cooley GO Docs Y Combinator Safe Financing Documents (Singapore) Generator. Large investors should be happy because deals can get closed more quickly as seed investors, given this information, rapidly sign their docs. Investors will buy a note for principal amount, and the note then has interest until its maturity date. These are similar to a note in that they convert into shares at the next financing round, but there's no maturity date or interest rate. A SAFE note refers to Simple Agreement for Future Equity, which was created by an accelerator, Y Combinator. Answer (1 of 5): Publicly available? Convertible Note Template Ycombinator Template convertible note template ycombinator This term sheet summarizes key terms of a proposed convertible note issuance, for discussion purposes only. The terms of the SAFE are company friendly and are based on Y-Combinator's template agreement of the same name Y Combinator's SAFE contract templates Silicon Valley Safe Agreement The convertible note had been Silicon Valley's traditional funding instrument for seed-stage startups for the last few years. what this is This note is a convertible instrument that is intended to be used to document a seed investment from a third-party investor or a bridge financing from existing shareholders. The instrument is viewed by some as a more founder-friendly alternative to convertible notes. Convertible Note Scenario B. The term sheet template they published in 2017 made a huge positive impact in the development of our ecosystem. Tl;dr: SAFE cap and discount version of the Y-combinator post-money SAFE financing document explained line by line explanation. On the flip side, a SAFE is a 5-7 page document that was created to streamline the seed investment process. I can also more easily see where I need to add more content to fill in the gaps for you. There is no calculator in Excel to actually illustrate the mechanics for the new SAFE so I made it. Hey you! It contains YC's latest safe version, post-money safe v1.1. There are a lot of online services out there that can quickly create legal documents, but Clerky stands . That loan will have a principal amount (the amount of the investment), an interest rate (usually a minimum rate of 2% or so), and a maturity date (when the principal and interest must be repaid). Official Y Combinator Safe Financing Documents. Convertible notes are not equity, so technically they do not go into the count of shares. SAFE Notes. 3. 500 Startups calls its model convertible investment document the KISS or "Keep It Simple Security". It was prepared by James Riley at Goodwin Proctor. Convertible Equity. Y Combinator's Simple agreement for future equity (Safe) was created as an alternative to convertible debt and seed equity financing for startup companies. However, over the past twelve months, YCombinator, an accelerator in the United States, has introduced a new instrument called the ' Simple Agreement for Future Equity ' or the SAFE Note. Founders will have treated their earliest supporters right, and those investors will, for once, understand clearly how their securities . The loss of board control is most significant because it means the founders . September 2010 The reason startups have been using more convertible notes in angel rounds is that they make deals close faster. . Click here to use the Cooley GO Docs NVCA Financing Documents Generator. Initially made available by Y Combinator (YC) in 2013 and subsequently updated in late 2018, the SAFE investment instrument was intended to improve on the highly popular convertible note used by startups during the seed stage or as a short-term bridge between equity funding rounds. Under the KISS convertible note, the note is repayable on the maturity date (typically 18-24 months from the date of the convertible note) if it has not already converted to shares. Our first safe was a "pre-money" safe, because at the time of its introduction, startups were raising smaller amounts . The terms of the note are substantially based on the simple agreement for future equity created by the US accelerator, Y-Combinator. or check out. Download it here. The terms of the note are substantially based on the simple agreement for future equity created by the US accelerator, Y-Combinator. In 2020, the number of non-convertible notes (e.g., SAFE notes and KISS notes), used by pre-funding companies is just as prevalent (58%) as the number of convertible debt notes issued. Startup accelerator Y Combinator (commonly referred to simply as "YC") released a set of financing documents (referred to as "Safe", or "Simple Agreement for Future Equity"). I. Y Combinator calls its model convertible investment document the SAFE or "Simple Agreement for Future Equity". For any formal presentation it's the same as a cap table _without_ the convertible note, plus a few rows or a footnote explaining the note as a separate matter. You and your merry band of hackers got a product out, some light traction and attracted $1m from Angel investors. Y-Combinator released the new post-money SAFE in October 2018. Here's Y Combinator's official website for safes (simple agreement for future equity) and other templates, such as term sheets and sales agreements. We took the Convertible Note opportunity given by the folks at Startup India a bit further by moving to what Y-Combinator developed for its investments, the SAFE.As defined by Y-Combinator, "A SAFE is a Simple Agreement for Future Equity.An investor makes a cash investment in a company, but gets company stock at a later date, in connection with a specific event. The seed funding platform "Y-Combinator" claims to have developed it in 2014 as a simple replacement for convertible notes and it has since been copied widely. Y-Combinator's templates here. The original SAFE was in many ways Y Combinator's response to the then prevalent form of early-stage financing: the convertible note. In Y Combinator's own words: The safe (simple agreement for future equity) is intended to replace convertible notes in most cases, and we think it addresses many of the problems with . It was created as a simpler alternative to traditional convertible notes. Y Combinator was the creator of the original SAFE. As YC writes on their site: > Y Combinator introduced the safe (simple agreement for future equity) in late 2013, and since then, it has been used by almost all YC startups and countless non-YC startups as the main instrument for e. Y Combinator offers various versions of safes (like "valuation cap, no discount" and "valuation cap and discount," as well as a pro rata side letter) free to download. Click the image on the left to access Upcounsel's Convertible Note template. . Y Combinator developed SAFE notes in response to difficulties arising from convertible note agreements. The convertible note from angels is structured up as a: $1m convertible note (with some interest rate. Then Y Combinator invented the SAFE: a streamlined version of the convertible note. Ryan, I definitely agree that the convertible note is a more pro-investor instrument, and I believe that it is for this reason that SAFEs haven't really taken off in Singapore among business angels, and definitely not VCs. Your first angel round is typically a convertible note. The basic structure is that they get one of three %s: 1) whatever the A round determines the valuation to be, they get to invest based on that valuation (usually at a discount). Decide on what kind of e-signature to create. It allows startups to easily structure their seed investments without maturity dates or interest rates . Y Combinator created the SAFE (Simple Agreement for Future Equity) a few years ago as an "upgrade" on convertible notes. The website contains detailed information about each section with a downloadable template. By making it easier for startups to give different prices to different investors, they help them break the sort of deadlock that happens when investors all wait to see who else is going to . In Australia, startups still raise capital through debt and equity, and increasingly convertible notes (a hybrid of debt and equity). They come in a few different flavors, all of which we present. 3/4) if there is no A round (regardless of whether it is because everything . Simple. http://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/termsheet . Deal is an offer a work with any entity formation through stripe atlas. 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