Simple Agreement For Future Equity Example With Balance Sheet In Miami-Dade
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An SAFT is an investment contract between investors who provide capital and developers who issue the s after specific conditions are met. An SAFE is a contract where investors provide capital in exchange for equity in a company at a future date.
A simple agreement for future equity (SAFE) is a financing contract that may be used by a startup company to raise capital in its seed financing rounds. The instrument is viewed by some as a more founder-friendly alternative to convertible notes.
From a legal perspective, SAFEs are generally viewed as derivative contracts providing rights to future equity ownership (i.e., warrants without an expiration date). As such, they fall under specific state and federal regulations.
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 SAFE is an investment contract between a startup and an investor that gives the investor the right to receive equity of the company on certain triggering events, such as a: Future equity financing (known as a Next Equity Financing or Qualified Financing), usually led by an institutional venture capital (VC) fund.
