Y Combinator's safe (simple agreement for future equity) is a widely used fundraising instrument by startups. Initially introduced as a "pre-money" safe, it facilitated early-stage fundraising before priced rounds. However, as fundraising evolved, larger seed rounds became common, leading to the introduction of the "post-money" safe in 2018. The post-money safe provides precise ownership calculations and allows for high resolution fundraising. It is a flexible, one-document security that saves time and money in legal fees. Y Combinator recommends reviewing the Safe User Guide for a comprehensive understanding of the safe. Please consult a lawyer before using any of the safe forms.
**Key takeaways**
- Y Combinator's safe is a popular fundraising instrument for startups.
- The post-money safe, introduced in 2018, allows for precise ownership calculations.
- It enables high resolution fundraising and saves time and money in legal fees.
- Y Combinator recommends reviewing the Safe User Guide for a better understanding of the safe.
- Consultation with a lawyer is advised before using any of the safe forms.
Different versions of the SAFE
- Post-Money Safe for US Companies: This version of the SAFE agreement is intended for use by US companies and has been widely used by YC and non-YC startups for early-stage fundraising. It allows founders and investors to calculate the exact ownership percentage of the company sold.
- Post-Money Safe for International Companies: This version is designed for companies formed in Canada, Cayman, and Singapore. It also includes an optional side letter for each country. It is recommended to consult with a lawyer in the relevant country before using these international forms.
- Pre-Money Safe: The first version of the SAFE agreement introduced by Y Combinator, it was used when startups raised smaller amounts of money before a priced round of financing. It provided a simple and fast way to secure initial funding.
This document discusses the terms of a Simple Agreement for Future Equity (SAFE) between an investor and a company. The SAFE outlines the rights and obligations of the investor and the company regarding the purchase of shares of the company's capital stock. The key terms include the Post-Money Valuation Cap, which determines the conversion price of the SAFE into preferred stock or common stock in the event of an equity financing or liquidity event. The document also includes definitions, representations, and miscellaneous provisions related to the SAFE. This form is provided by Y Combinator and is not registered under securities laws.
**Key takeaways**
1. The SAFE outlines the terms of a future equity investment in a company.
2. The Post-Money Valuation Cap determines the conversion price of the SAFE.
3. The document includes representations and restrictions to comply with securities laws.
4. The investor must be an accredited investor.
5. This form is made available under a Creative Commons license.
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