Understanding Safe Agreements

Many people believe it is important for investors and founders to come together in the middle so that negotiations can work together for greater good. All tools must be safe and productive at both ends, so that investors can continue to invest and create developers. If people don`t understand the math of safe slippages, then an agreement on actions might be best for them. A pre-money valuation can also be considered a better choice. Ask yourself: Should I increase justice with a complete anti-dilution ratchet, or with broad-based average weighted anti-dilution average? If you go with a large-scale weighted average, then do a price round and no note. If you venture on a capped note, you should do so in the equity. Our updated safes are post-money safes. By “post-money” we say that the safe owner is measured by post, all the safe money is accounted for – which is now his own trick – but before (before) the new money in the price cycle that transforms and dilutes the coffers (normally series A, but sometimes the Seed series). The post-money safe has what we think is a great advantage for founders and investors – the ability to calculate immediately and exactly how much property the company has been sold.

For the founders, it is essential to understand how much dilution is caused by each chest they sell, just as it is fair for investors to know how much they have bought ownership of the business. Some issuers offer a new type of security as part of some crowdfunding offers they have called safe. The acronym means Simple Agreement for Future Equity. These securities are risky and very different from traditional common shares. As the Securities and Exchange Commission (SEC) states in a new investor newsletter, despite its name, a SAFE offer cannot be “simple” or “safe.” Kirsty: Thank you very much. All right. Hi everyone. My name is Kirsty Nathoo.

I am CFO, one of the partners of Y Combinator. And now I`ve worked with probably more than 1,500 companies to put them in the coffers, to make our investments in the YC, and then see them through their subsequent increases, either on transformational instruments or on equity sessions. I`ve seen a lot of things before. And so this presentation is supposed to give you some understanding for some of the things that people don`t necessarily understand when they raise money and hopefully will help you avoid some of the pitfalls we`ve seen… some of the mistakes made by the founders. The key message of this presentation is that it is important that you understand, at all stages of the company`s lifecycle, how much of the business you have sold to investors and, in this context, how much you own. The thing that complicates this is that most companies will first collect money for convertible instruments, and since these processing instruments are not yet shares, for many founders it is not immediately clear how much of the business they have sold. So I`ll talk about it through some of the mechanics and help you understand how everything works, so you won`t be surprised when it`s too late and you can`t do anything about it.

So the other thing you should take into account is that a lot of companies and founders are just going to say, “Oh, I don`t have to worry about my heading table. My lawyers take care of my table. I don`t have to worry. And in fact, it`s a really dangerous statement. Here too, make sure you understand. It is your responsibility as CEO or founder of the company to understand all of this. And there are many ways to maintain your cap table. There are many ways to keep this in mind.