Simple Agreement For Future Equity Example With Balance Sheet In Florida
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FAQ
For example, if a SAFE has a valuation cap of $10 million, and your startup's next financing round values the company at $15 million, the SAFE investor's equity will be calculated based on the $10 million cap, not the $15 million valuation.
How do you record a convertible note on a balance sheet? Classify the convertible note as a long-term liability on the balance sheet. Record the full face value of the note under long-term liabilities. Do not record any value for the conversion feature on the balance sheet initially.
They are accounted for as equity on the balance sheet. When the Simple Agreement for Future Equity converts to preferred stock, the accounting entries are that the SAFE entry is removed and the amount is credited to preferred equity (ignoring any APIC implications).
When capital is raised, it can take the form of either equity (partial ownership of the company) or convertible debt or straight debt with warrants (lender). In either case, this information should be recorded on the cap table.
Convertible Notes are loans – so they are recorded on the Balance Sheet of a company as a liability when they are made. Depending on the debt's maturity date, they can either be shown as a current liability (loans maturing within 12 months) or as a Long-term liability (loans maturing over 12 months).
The Discount Rate is calculated as 100% minus the percent discount the SAFE investors are entitled to. For example, if SAFE investors are entitled to a discount of 20% (they can buy Standard Preferred Stock 20% cheaper than subsequent investors), the Discount Rate is 80% = 100% - 20%.
