Understanding SAFE Agreements
Entrepreneurs raising early stage seed funding have historically had one main option to secure capital: a convertible note. However, more recently, a new legal instrument known as a SAFE or a Simple Agreement for Future Equity has given startup founders and investors a choice. NEXT attorneys, as seasoned SAFE Agreement lawyers, have represented founders using a SAFE in a multitude of transactions.
Elements of a SAFE
A SAFE is an agreement between an investor and a company that gives the investor rights to acquire equity in the company in the future at a discount to the next priced equity financing, or an agreed upon maximum “Valuation Cap”. This enables the founder and investor to avoid the need to negotiate the specific valuation of the company at the time of the initial investment, which based on the early stage of the company, may be difficult to agree upon.
SAFEs provide a simpler mechanism for startups to seek initial funding than convertible notes. SAFEs do not accrue interest, do not have a set maturity date, nor do they have the complexities around a maturity event. As a result, they reduce the amount of legal cost and negotiation time.
Fixed Fee SAFE Package
We have drawn from our experience as SAFE Agreement lawyers to develop a comprehensive fixed fee SAFE Packages, which includes:
- Strategic guidance on the financing process
- A review of prior corporate documents for existing investor rights
- Preparation and negotiation of the Term Sheet
- Preparation and negotiation of Simple Agreement for Future Equity
- Corporate Resolutions
- Preparation of Accredited Investor Questionnaire
- Management of the Closing
- Federal Level – SEC – Securities Filings
- State Level Securities Filings
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