Sort your funding quickly and focus on growth, with a well-established and standardised method of funding, that delays the need to decide on a fixed valuation.
What is a Simple Agreement for Future Equity (SAFE)?
A SAFE is an agreement made with an investor where they provide funding, in return for shares in your startup in the future, to be issued at the time of your startup’s first equity funding round.
Why generate this document?
Like a Convertible Loan Note, a SAFE is shorter and simpler than the types of documentation used in later, larger investment rounds. The key terms of a SAFE are well understood in the market, so there should be minimal negotiation from investors, saving both time and money.
What does the Clara SAFE do?
Makes the investor a future shareholder in your startup’s topco, to take place when their investment is converted into shares.
Sets a discount at which the money invested may convert into shares, at a discount to the price per share offered to the investors in your equity funding round.
Sets a valuation cap – the maximum valuation at which the investment amount converts into shares, no matter the valuation you agree with investors in equity funding rounds.
Has the option for you to grant the investor pro rata participation rights: the right to invest in the equity funding rounds in which the SAFE converts to shares.
Has the option for you to grant the investor “most favoured nation (MFN)” rights, meaning that if you grant any future investors rights more favourable than the ones in this SAFE, the investor has the right to upgrade it to match.
Has the option for you to grant the investor certain information rights (such as access to accounts).
Uses a post-money valuation (the value of a company after an investment round), meaning that further funds (such as those arranged through SAFEs) received before a funding round, would not dilute the investor's equity. Most share options (e.g. under your Share Incentive Plan) would also act to dilute existing shareholders.
Is governed under English law with a dispute resolution mechanism using expedited ICC arbitration procedures to be held in a place you can select in the form.
A SAFE is generally more startup-friendly than a Convertible Loan Note: it typically does not have a deadline for repayment or conversion into shares, whether an equity funding round has occurred or not. A SAFE also does not carry interest.
A SAFE is similar to a typical KISS in its overall terms and mechanics.
The investor will take the same class of shares as those to be issued in the next equity funding round.