Post Money SAFE with Valuation Cap

Post Money SAFE with Valuation Cap
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One of the simplest (and cheapest) ways to invest in an early-stage company is often through a Simple Agreement for Future Equity (SAFE). The investor invests cash and the company signs a three-to-five-page SAFE agreement giving the investor certain rights.

This SAFE is a "post-money" SAFE. By “post-money,” we mean that SAFE holder ownership is measured after (post) all the SAFE money is accounted for but still before (pre) the new money in the priced round that converts and dilutes the SAFEs. The post-money SAFE has a potentially huge advantage for both founders and investors – the ability to calculate immediately and precisely how much ownership of the company has been sold. It’s critically important for founders to understand how much dilution is caused by each SAFE they sell, just as it is fair for investors to know how much ownership of the company they have purchased.

This SAFE is suitable for a cash investment now in exchange for a contract that provides rights to the investor for future equity in the company, similar to a warrant except without determining a specific price per share at the time of the initial investment. A SAFE is not a loan: there is no interest rate, no payments, and no maturity date. A SAFE is not equity: it is not common or preferred stock and does not give any voting rights or other equity rights under state laws.

As a security, this SAFE Agreement is suitable for the issuer to offer to investors rather than an equity or debt security.

We've made the first two (2) pages of the seven (7) page SAFE available for your preview.

This sample document is intended to serve as a starting point only, and should be tailored to meet your specific requirements. This document should not be construed as legal advice for any particular facts or circumstances. Note that this sample document presents an array of (often mutually exclusive) options with respect to particular deal provisions.

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