Guam Simple Agreement for Future Equity

State:
Multi-State
Control #:
US-ENTREP-008-5
Format:
Word; 
Rich Text
Instant download

Description

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.
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FAQ

Pre-seed funding is an early funding round in which investors provide a startup business with capital (sometimes up to $2 million) to develop its product in return for equity in the company.

How Much Equity Should be Given Away in a Seed Round? A general rule of thumb is giving away between 10-20% equity during a seed round. This may likely be to angel investors who are willing to put in checks right at the origin of a company during the early stages.

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.

Realistically, you should expect to give away between 10% and 25% at this point. This round is all about getting the necessary funding to build your product, to figure out your product-market fit, and to search for that scalable growth channel.

Founders should be prepared to give away 15-30% in equity at Series B. ?I always advise friends to aim for 15% and plan for 20%.

A SAFE note is simply a legally enforceable promise to allow an investor to buy a certain number of shares at a specific price at a later date. Valuation cap ? A valuation cap is a limit on how much a SAFE can be converted to equity ownership in the future.

Remember, there is no such thing as a free lunch here. ing to SeedInvest, most investors take a 10-15% cut of equity at the pre-seed stage. The more funding you raise, the more you'll be giving up in exchange (in terms of company equity).

How Much Equity Should be Given Away in a Seed Round? A general rule of thumb is giving away between 10-20% equity during a seed round. This may likely be to angel investors who are willing to put in checks right at the origin of a company during the early stages.

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.

Cons: SAFE investors assume most, if not all, of the risk, in that there is no guarantee of any equity ownership in the company. ... A SAFE holder is not entitled to any company assets in the event of a liquidation.

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Guam Simple Agreement for Future Equity