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As soon as the terms are agreed and the SAFE is signed by both parties, the investor sends the agreed funds to the company. The entity uses the funds in accordance with the applicable conditions. The investor receives equity (SAFE preferred shares) only when an event mentioned in the SAFE agreement triggers the conversion. As the security of a single flexible document without many trading conditions, start-ups and investors save money in legal fees and reduce the time spent negotiating investment terms. Startups and investors generally have only one point to negotiate: the valuation cap. Since a safe does not have an expiry date or maturity date, no time or money should be spent on extending maturities, reviewing interest rates or otherwise. Some issuers offer a new type of security as part of some crowdfunding offers they have called safe. The acronym means Simple Agreement for Future Equity. These securities are risky and very different from traditional common shares. As the Securities and Exchange Commission (SEC) states in a new investor newsletter, despite its name, a SAFE offer cannot be “simple” or “safe.” As a start-up, you come in agreement 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 the success of a startup, but not all SAFE agreements are equal.

Apart from Y Combinator, SAFE is tested and used by startups in the crowdfunding markets. In 2020, the number of non-convertible notes (for example. B SAFE and kiss notes) used by pre-financing companies is just as widespread (58%) The number of convertible bonds issued. If companies become more well known to SAFE from the beginning, this rather young security may have found its ideal niche in the offers of Title III, also known as crowdinvesting for all investors. If angels make a lot of money with a deal, it`s not because they invested with a valuation of $1.5 million instead of $3 million. That`s because the company has really succeeded. At the end of 2013, Y Combinator published the Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt. [2] This investment vehicle is now known in the U.S. and Canada because of its simplicity and low transaction costs. However, as use is increasingly frequent, concerns have arisen about its potential impact on entrepreneurs, particularly where several SAFE investment cycles take place prior to a private equity cycle[4] and potential risks to un accredited crowdfunding investors who could invest in the SAFes of companies that realistically, never receive venture capital financing and therefore never convert to equity. [5] Y Combinator, a well-known technology accelerator, created the SAFE rating in 2013 (a simple agreement on future capital) and uses it to finance most start-ups participating in three-month development meetings.