![]() There’s also a chance they will have to pay less than others who invest in the business later - e.g., during a series A round. Second, it allows investors to (potentially) own more of a company than they might have expected to when the SAFE note converts, depending on how the company is valued in the next funding round. That event is almost always a series A financing round or liquidation How SAFE Notes Function for Investorsįrom an investor’s point of view, what is a SAFE note’s appeal? First, it rewards them for getting in on the ground floor. A SAFE note converts into stock when a certain event occurs. More precisely, it’s a warrant to purchase stock in a future priced round. It’s sort of like selling stock, but you get to hold onto the shares for the time being. In return, the investor will receive equity in your company at some point in the future. When you issue a SAFE note, you receive money from an investor. Significant risks are involved in using this particular investment vehicle, which compound as you issue more SAFE notes to investors.Ī SAFE note is a type of convertible security, where ‘SAFE’ stands for Simple Agreement for Future Equity. Compared to other seed funding options, SAFE notes can provide easy access to capital with little upfront negotiation, compromise, or hassle. ![]() When asked, “What is a safe note?” plenty of founders and entrepreneurs would respond with some variation on the description above. ![]() But you don’t need to worry about that now - SAFE notes have allowed you to secure seed funding without giving up any control in your company or borrowing money you may struggle to repay. In exchange for their financing, the investor will own a certain percentage of your company at an unspecified future date. There is minimal back-and-forth negotiation and no debt obligations or loss of equity in the present. You issue a SAFE note to an investor and get financial support right when you need it.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |