Connecticut Term Sheet - Simple Agreement for Future Equity (SAFE)

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Multi-State
Control #:
US-ENTREP-008-1
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Word; 
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This term sheet summarizes the principal terms of the proposed Simple Agreement for Future Equity ("SAFE") financing of a Company, by certain Investors. This term sheet is for discussion purposes, is not binding on an Investor, nor is an Investor obligated to consummate the financing until a definitive SAFE agreement has been agreed to and executed. The term sheet does not constitute an offer to sell or an offer to purchase securities.

Connecticut Term Sheet — Simple Agreement for Future Equity (SAFE) is a legal document outlining the terms and conditions of an investment in a startup or early-stage company located in the state of Connecticut. It is a popular alternative to traditional equity financing methods such as convertible notes and preferred stock. Keywords: Connecticut, Term Sheet, Simple Agreement for Future Equity, SAFE, startup, early-stage company, investment, equity financing, convertible notes, preferred stock. The Connecticut Term Sheet — Simple Agreement for Future Equity (SAFE) provides a framework for investment between an investor and a company. It allows the investor to contribute funds to the company in exchange for the right to acquire equity in the future, typically during a subsequent financing round or event. This financial instrument helps startups raise capital without determining the exact valuation of the company at the time of investment. Instead, it establishes a mechanism for determining the future value of the investment and the amount of equity the investor will receive. There might be different types of Connecticut Term Sheet — Simple Agreement for Future Equity (SAFE) based on the specific terms negotiated between the investor and the company. Some common variations include: 1. Valuation Cap SAFE: This type of SAFE includes a maximum valuation cap, which sets an upper limit on the valuation of the company at the time of the equity conversion. This protects the investor by ensuring that their equity stake is not diluted beyond a certain point. 2. Discount SAFE: A Discount SAFE offers investors the opportunity to acquire equity at a reduced price compared to other investors during a subsequent financing round. This discount incentivizes early-stage investors to provide capital to the company. 3. MFN (Most Favored Nation) SAFE: With an MFN SAFE, the investor is entitled to any more favorable terms that the company may offer to subsequent investors in the future. This provision ensures that the investor receives the best possible terms available. 4. Pro Rata Rights SAFE: Pro Rata Rights SAFE grants the investor the right to participate in future equity rounds to maintain their ownership percentage. This allows them to invest additional funds and protect their ownership stake from dilution. Connecticut Term Sheet — Simple Agreement for Future Equity (SAFE) has become increasingly popular in startup funding due to its simplicity and flexibility. It provides a mutually beneficial framework for both investors and companies, allowing startups to secure capital while offering investors the potential for significant returns on their investment.

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FAQ

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.

A safe (Simple Agreement for Future Equity) term sheet is a type of investment instrument used in early-stage startup funding. It allows investors to provide capital to a startup in exchange for the right to receive equity at a later date.

SAFE (or simple agreement for future equity) notes are financial agreements that startups often use to help raise seed capital. Essentially, a SAFE note acts as a legally binding promise to allow an investor to purchase a specified number of shares for an agreed-upon price at some point in the future.

In 2020, the number of non-convertible notes (e.g., SAFE notes and KISS notes), used by pre-funding companies is just as prevalent (58%) as the number of convertible debt notes issued.

How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.

No, a SAFE note is not a loan or debt, it is accounted for an equity on the balance sheet. Unlike convertible debt - or pretty much any debt, it does not have an interest rate nor does it have a maturity date.

Suppose a SAFE is issued with a 20% discount. This means if the SAFE investor invested $40,000 in a startup whose price per share at the time of future investment comes out to be $10, he'll get the share at a 20% discounted price, which is $8. This means he'll get 5000 shares instead of 4000.

If a company fails to secure future equity financing or get acquired, then an investor's SAFE will never convert into equity. The SAFE holder will be entitled to repayment in a dissolution of the company, although it's likely there won't be meaningful assets left to pay the SAFE holder in that scenario.

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This legal document provides a framework for the investment agreement, outlining the terms and conditions of the investment, and is designed to be a simpler and ... The former is a contractual agreement that could convert into equity in a future financing round, while the latter is short-term debt that converts into equity.Learn how and why a venture capital term sheet is more than a contract and instead is more like a blueprint for an investment. 14 Aug 2023 — There is a relatively new way that startups and early-stage companies are raising capital. A simple agreement for future equity (SAFE) is a ... No single piece of paper is as pivotal for your startup's future than the term sheet. Here's what founders need to know about how to read a term sheet. TERM SHEET FOR SIMPLE AGREEMENT FOR FUTURE EQUITY (SAFE). This is a summary of the principal terms of (i) a restructuring of [Startup Name] so that it is a ... (m)“SAFE” means an instrument containing a future right to shares of Capital Stock, similar in form and content to this Agreement, purchased by investors for ... Create your own documents by answering our easy-to-understand questionnaires to get exactly what you need out of your Friends and Family Simple Agreement for ... Go to the Generate Documents tab, choose International from the dropdown and select Simple Agreement for Future Equity. Complete the form. Complete each field ... 6 Apr 2023 — A term sheet is a preliminary, non-binding document outlining the proposed investment amount and other important details of a deal.

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Connecticut Term Sheet - Simple Agreement for Future Equity (SAFE)