Simple Agreement For Future Equity Example Form D In Montgomery
Description
Form popularity
FAQ
A "liquidity event" is often defined to mean either an IPO or other listing of the company's stock on a national stock exchange or a sale of the company or other change of control of the company.
SAFE Note Example For example, an investor purchases a SAFE note from your startup with a valuation cap of $10M. Your company's value is set at $20M at $10/share during the subsequent funding round. The SAFE note will convert based on the valuation cap of $10M.
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%.
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.
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).
The Simple Agreement for Future Equity is a popular financial instrument among Philippine startups looking to raise capital. SAFE allows startups to raise funds without diluting their ownership and control over the business. Additionally, it is faster, less complex, and less expensive than traditional equity financing.
