Simple Agreement For Equity In Hillsborough
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FAQ
A SAFE, also known as Simple Agreement for Future Equity, is a simpler alternative to convertible notes. This agreement allows you to take on investments that will convert into equity in the future.
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%.
Simple agreements for future equity, or SAFEs, are flexible agreements providing future equity rights without immediate valuation. SAFEs are commonly used for early-stage startup funding. Conversion terms are triggered by specific events like equity funding rounds or acquisitions.
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).
A company provides you with a lump sum in exchange for partial ownership of your home, and/or a share of its future appreciation. You don't make monthly repayments of principal or interest; instead, you settle up when you sell the home or at the end of a multi-year agreement period (typically between 10 and 30 years).
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.
Preferred equity is part of the real estate capital stack — in other words, a type of financing a sponsor or developer will employ as part of the aggregate capital raise for a given real estate project.
Equity agreements commonly contain the following components: Equity program. This section outlines the details of the investment plan, including its purpose, conditions, and objectives. It also serves as a statement of intention to create a legal relationship between both parties.
