Y Combinator Safe Agreements

Another innovation of the vault concerns a “proportionate” duty. The original vault required the Company to allow vault holders to participate in the funding round after the funding round into which the vault was converted (p.B. if the vault were converted to Series A preferred share financing, a security holder – now holding a sub-series of Series A preferred shares – would be allowed to purchase a proportionate portion of the Series B preferred shares). While this concept was consistent with the original vault concept, it made less sense in a world where vaults were becoming independent funding cycles. Thus, the “old” pro-rata right is removed from the new vault, but we have a new model page letter (optional) that provides the investor with a pro-rated right in Series A preferred share financing, based on the investor`s converted secure ownership, which is now much more transparent. Whether or not a start-up and an investor receive the cover letter with a safe will now be a decision for the parties to make, and it can depend on various factors. Factors to consider may include (among others) the purchase amount of the safe and the amount of future dilution that the pro-rata right will entail for the founders – an amount that can now be predicted with much more accuracy when using post-money safes. Whether you are using the vault for the first time or are already familiar with vaults, we recommend that you read our Secure User`s Guide (which replaces the original vault primer). The Safe User`s Guide explains how to convert the vault, with sample calculations as well as additional details about the proportional secondary letter, explanations of other technical changes we have made to the new vault (e.B.

Language for tax treatment) and suggestions for best use. SAFE stands for Simple Agreement for Future Equity. It`s a smart way for startups to raise debt-free seed capital. Startups enter into agreements with investors to receive a certain amount of money today in exchange for shares that the investor will receive at a later date. As a flexible, single-document security with no many conditions to trade, Safes saves startups and investors money on legal fees and reduces the time it takes to negotiate investment terms. .