Understanding SAFEs (Simple Agreements for Future Equity)
Baseball’s regular season is closing out and the playoff teams are set (yes, it’s another Red October in Philly!). This week, let’s review SAFEs (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 and more simplistic way for start-up companies to obtain funding, versus a 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
- 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.
Here are a few other things that may be of interest:
- ERTC Update: IRS Red Flags the Employee Retention Tax Credit (stambaughness.com)
- The Winning Perspective of Mezzanine Debt – YouTube (The latest from David Barnitt @ Attract Capital)
- webinar | Workplace Safety in a Violent World (nfib.com) (10/4 12-1pm EST)
- Year-End Tax Strategies (eisneramper.com) (11/20; 12-330pm EST)
- Data Driven Change Management (eisneramper.com) (10/25 2-3pm EST)
As always, please don’t hesitate to email myself (email@example.com), Andy Miller (firstname.lastname@example.org), Christian Miller (email@example.com), Erik Spurlin (firstname.lastname@example.org), Brad Leber (email@example.com) or anyone in our office with questions or comments.