Simple Agreement for Future Equity (SAFE)

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

  1. 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.
  2. 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.
  3. 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.
  4. 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:

  1. Clearly define the terms of the Qualifying Financing event, ensuring both parties have a mutual understanding.
  2. Establish the discount rate for shares in the future financing event, offering an attractive incentive to investors.
  3. 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:

  1. Need guidance on the specifics of your SAFE Agreement.
  2. Require assistance customising the agreement to your unique business needs.
  3. 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.

Tailoring is when a lawyer customizes an automated legal document to meet your specific needs. This process starts with a consultation, after which you will complete a form to generate the initial draft of the document (if you haven’t already generated a DIY legal document). The lawyer will amend the document in line with what was discussed during the consultation, then send it to you for review. Once all reviews are complete the document will be finalised for use, or eSigning (if applicable).

A review is when you send feedback to the lawyer on a tailored document, and they make changes or respond to your comments. Feedback should be made by commenting directly within the document. Tailoring includes two reviews as standard. This is usually more than sufficient. Additional reviews may be charged separately if needed, so it is recommend you thoroughly check and comment on the document before returning it to the lawyer.

eSigning is when a document is executed by collecting an electronic signature from a party to make it legally binding, instead of printing and signing on paper. This is achieved by using a third-party service such as HelloSign that will send a link to the email of each party required to sign the document. The recipient will then follow the link and sign the document using their computer or mobile device. The system will record when they viewed and signed the document as well as from which IP Address. We recommend all our documents be signed electronically, and will manage the process for each tailored document with which eSigning is included.

Mode.law offers document automation services in addition to our tailoring services. If a tailored document is intended to be used repeatedly, mode.law can create a reusable form within your mode.law account. The form can be used to generate new documents based on your tailored template. The form will complete the main variable information that will differ such as (for example) new counter parties, purchase orders or statements of work. This speeds up your business processes, and makes things efficient to tailor when you need a few additional changes. Fees for document automation can be quoted during a consultation.