Safes Notes
by Joe · 40 things on Twos
- SAFEs were INVENTED by YC
- ✓ Look into SAFEs
- https://youtu.be/Dk6JNTDec9I
- Kirsty Nathoo - CFO of Y Combinator
- A safe is a single standardized form that does not leave a lot of room open for negotiation and makes it easier to raise initial capital
- Know your cap table
- CapTable.io
- Simple agreement for future equity
- Convertible security
- Receive money now, issue stock later
- Minimal negotiations
- Not debt
- Very simple, not a lot of legal jargon
- Post money: after all the safes
- Pre-money valuation + money raised = post-money valuation
- Amount raised / post-money valuation cap = ownership
- Different flavors of SAFES
- Discount
- Uncapped
- Uncapped with a "most favored nation" call
- If an investor gets a better valuation down the line, then the original investor gets those terms
- Restricted stock purchase agreement
- A safe is a promise to give shares in the future
- Safes do not dilute earlier investors in the safes
- Options pool: Employee incentive plan
- Founders, options issues, options available
- Post-money option pool (equity set aside for more early hires)
- Priced round
- Safes convert
- (15% of our total diluted shares, both common and preferred)
- Options pool in increased
- New investors invest
- ("Safes are included in pre-money")
- If the priced round is lower than the valuation cap on the SAFE, then the SAFE will convert at the same price as the Series A investors
- Price per share = Valuation / Capitalization
- Capitalization = Total fully diluted shares after safe conversion and option pool increase
- Number of shares = investment amount / price per share
- Fundraising is a means to an end
- I am getting really frustrated by the math.