Unlock Growth with a Simple Agreement for Future Equity (SAFE Agreement)
A Simple Agreement for Future Equity (SAFE Agreement) offers a flexible way for companies to raise funds. Investors provide funds now, but receive shares later during a future capital raise. This funding method is popular among startups and growing businesses seeking to secure funds and accelerate growth without immediate equity dilution.
Key Features of a SAFE Agreement
- Future Equity Issuance: The SAFE investor provides a purchase amount upfront, but receives shares during a later event called Qualifying Financing. This structure allows companies to raise funds without diluting equity right away.
- Discounted Share Price: To incentivise investors for providing capital without instant equity, they receive shares at a discounted rate during the Qualifying Financing event. This discount reflects the added risk and uncertainty assumed by the investor.
- Purchase Amount Return: If the company can’t issue shares for any reason, the purchase amount is returned to the SAFE investor. This provision protects the investor’s interests in unforeseen circumstances.
- Legal Advice Recommended: Due to the complexity of SAFE Agreements, it is essential to seek legal advice before signing. Legal consultation ensures a clear understanding of the terms and conditions, protecting both the company and investor.
Maximize the Benefits of a SAFE Agreement
With a well-crafted SAFE Agreement, your business can unlock growth and attract investments. Here are some essential considerations for maximizing the benefits of a SAFE Agreement:
- Clearly define the terms of the Qualifying Financing event, ensuring both parties have a mutual understanding.
- Establish the discount rate for shares in the future financing event, offering an attractive incentive to investors.
- Specify the conditions under which the purchase amount will be returned, safeguarding the investor’s interests.
By addressing these crucial aspects, your SAFE Agreement can provide a strong foundation for raising funds and fostering growth.
When to Talk to a Lawyer or Get a Quote
Our SAFE Agreement templates provide a solid foundation for companies looking to secure funding through future equity issuance. However, it is crucial to seek legal advice before signing such an agreement. Talk to a lawyer or Get a Quote if you:
- Need guidance on the specifics of your SAFE Agreement.
- Require assistance customising the agreement to your unique business needs.
- Encounter complex or unique circumstances that demand specialised legal expertise.
We recommend consulting a lawyer (such as Attune Legal) if you need help creating a SAFE Agreement or tailoring it to your business requirements. This will ensure that your agreement accurately reflects your negotiations with the investor while protecting your interests and complying with the law.
