Simple Agreement For Future Equity Example With Balance Sheet In Palm Beach
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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.
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 Simple Agreement for Future s is a contract between a blockchain developer and a buyer, who contributes a certain amount of capital for the promise of an equal amount of s when the project meets specific goals. An SAFT is similar to an SAFE, which is for equity.
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%.
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.
SAFEs were first developed by Y Combinator in 2013 as an alternative to convertible notes. A SAFE agreement is a type of convertible instrument, but unlike debt instruments, SAFEs do not accrue interest or have a maturity date, making them an attractive fundraising option for early-stage startups.