…..and you’re SAFE

Written by James Sanders

Football is getting ready to launch, which means baseball is closer to playoff time (let’s hope it’s another Red October in Philly!).  This week, I will review SAFEs (yes, I know this is a stretch, but what can I say). 

SAFE’s stand for Simple Agreements for Future Equity.   It’s an agreement between an investor and a company that gives the investor future rights to buy equity at an agreed upon price.  Investors will sometimes receive other rights like an advisory board seat, information updates, etc.  They were originated by the Y Combinator as an alternative way for start-up companies to obtain funding, versus the more traditional convertible debt method.  Below are some good articles on this private third-party funding instrument:

• Understanding SAFEs and priced equity rounds : YC Startup Library | Y Combinator
• Simple Agreement for Future Equity (SAFE): Definition, Benefits, and Risks (Investopedia.com)
• What is a SAFE Note? | GrowthMentor Glossary
• What is a SAFE? | AngelList

If this investment vehicle is something you are considering as a start up business, please make sure you are working with business counsel that is well versed in this process.  Next week we will talk about convertible debt.