At Dorm Room Fund, we invest with unsused SAFS without discount, but with an MFN clause. This means that if the SAFE is converted into equity, the founders end up having more of the company than if there was a cap or discount. If new investors buy shares for $1.00, it`s also the Dorm Room Fund. To complicate matters a bit, a SAFE sometimes has a discount. Since safe arrives later in front of each investor, the SAFE investor might want safe to be converted into equity with a discount on the subsequent funding cycle. Discounts are usually between 10 and 30%. To illustrate, I modeled what a 50% discount will look like. Instead of buying shares at 1.00 $US, the SAFE holder can buy shares at 0.50 $US. Here`s an example: A general misunderstanding is that SAFEs are standardized. If you have any questions regarding simple future equity agreements or other equity financing issues, lawyers from Parker McCay`s Corporate and Commercial Lending divisions are at your disposal. The startup (or any other company) and the investor enter into an agreement. You negotiate things like: As a start-up, you undoubtedly go through agreements with other companies, suppliers, contractors, investors and many others. A lesser-known agreement is the Simple Agreement for Future Equity (SAFE).
These agreements can be important for a startup`s success, but not all SAFE agreements are the same. The exact conditions of a SAFE vary. However, the basic mechanism is for the investor to provide specific financing to the company when it is signed. . . .