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CL

Carolynn Levy

03/07/18

@ Y Combinator

A discount SAFE allows investors to negotiate a discount rate instead of a valuation cap, rewarding early investment.

Video

YC

Carolynn Levy and Kirsty Nathoo - Startup Investor School Day 1

@ Y Combinator

Carolynn Levy and Kirsty Nathoo - Startup Investor School Day 1

03/07/18

Related Takeaways

KN

Kirsty Nathoo

10/17/18

@ Y Combinator

In rare cases where the priced round valuation is lower than the SAFE cap, SAFE investors may receive a better deal, converting at the lower price of the Series A round.

KN

Kirsty Nathoo

10/17/18

@ Y Combinator

Negotiating a SAFE typically involves only two points: the amount of money the investor will contribute and the valuation cap.

KN

Kirsty Nathoo

03/07/18

@ Y Combinator

The SAFE investor's shares are calculated based on the conversion price, which is determined by the valuation cap if it's lower than the priced round valuation.

YC

Y Combinator Cast

03/07/18

@ Y Combinator

The SAFE (Simple Agreement for Future Equity) allows investors to convert their investment into equity at a later date, but the exact ownership percentage isn't known until the priced round occurs.

KN

Kirsty Nathoo

10/17/18

@ Y Combinator

There are different types of SAFEs, including those with valuation caps, discounts, and uncapped SAFEs with most favored nation clauses, but the valuation cap is the most common.

YC

Y Combinator Cast

03/07/18

@ Y Combinator

Investors should model their SAFE conversions to understand the implications of multiple SAFEs with different valuations and discounts, as this can complicate ownership stakes.

CL

Carolynn Levy

03/07/18

@ Y Combinator

The MFN SAFE, or Most Favored Nation SAFE, allows investors to amend their terms if subsequent investors negotiate better terms.

YC

Y Combinator Cast

03/07/18

@ Y Combinator

When signing a SAFE, you might expect to own around 9% of the company based on an $800,000 investment at an $8 million cap, but this can be diluted by new money coming in during the priced round.

KN

Kirsty Nathoo

10/17/18

@ Y Combinator

A SAFE, or Simple Agreement for Future Equity, allows an investor to provide money now in exchange for a promise of shares at a future date when a priced round occurs.