Kentucky Simple Agreement for Future Equity

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Multi-State
Control #:
US-ENTREP-008-3
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Word; 
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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.

The Kentucky Simple Agreement for Future Equity (SAFE) is a legal financial instrument commonly used by startups and early-stage companies to raise capital. It allows investors to invest in a company in exchange for future equity. SAFE is specifically tailored for the state of Kentucky, but similar agreements exist in other states as well. The main purpose of a Kentucky Simple Agreement for Future Equity is to provide a simplified and streamlined process for fundraising, reducing the legal complexities associated with traditional equity financing. It enables startups to secure funding quickly, without having to determine an immediate valuation of their company. There are several types of Kentucky Simple Agreement for Future Equity, each designed to meet specific fundraising needs. Some common types include: 1. SAFE with a Discount Rate: This type of agreement entitles the investor to receive a predetermined discount on the future equity price when a qualified financing round occurs. The discount rate serves as an incentive for early investors. 2. SAFE with a Valuation Cap: In this type, a maximum valuation is set for the company at the time of the future equity round. Investors who enter into the agreement below the valuation cap will benefit from a lower price per share when the equity round takes place. 3. SAFE with a Conversion Trigger: This agreement includes specific conditions that trigger the conversion of the invested funds into equity. These conditions are typically tied to certain milestones or events, such as the company achieving a specific revenue target or securing a subsequent financing round. 4. SAFE with a Side Letter: This type of agreement may include additional terms negotiated between the company and the investor, which can cover unique provisions or customization catering to specific requirements of both parties. It is important to note that the Kentucky Simple Agreement for Future Equity is a legally binding document that should be drafted and reviewed by experienced lawyers to ensure compliance with state laws and protect the interests of both the company and the investor. Overall, the Kentucky Simple Agreement for Future Equity provides a flexible and efficient method for startups and investors to enter into a mutually beneficial financial arrangement, facilitating the growth and development of entrepreneurial ventures within the state.

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FAQ

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.

Calculation ing to the Discount Rate The total shares are calculated ing to the SAFE money invested divided by the share price in the next round, multiplied by the discount rate. If we take our example above, if during the next financing round, the company raises money ing to a share price of $10.

A simple agreement for future equity delays valuation of a company until it has more performance data on which to base a valuation. At the same time, it promises an investor the right to buy future equity when a valuation is made. A SAFE can be converted into preferred stock in the future.

money valuation is a company's estimated value after receiving outside investment or financing. So if a company was worth $10M, and then it raised another $5M, its postmoney valuation would now be $15M.

A Simple Agreement for Future Equity (we'll call it a SAFE from here on out) is an agreement that an early-stage startup makes with an investor?typically when raising money during a seed round. Because the startup doesn't yet have a formal valuation, it doesn't have shares to issue to the investor.

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.

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.

A simple agreement for future equity (SAFE) is an agreement between an investor and a company that provides rights to the investor for future equity in the company similar to a warrant, except without determining a specific price per share at the time of the initial investment.

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A Simple Agreement for Future Equity (SAFE) is an investment structure, formalized through a financing contract, that allows early-stage startups to invest in ... All you need to do is fill out a simple questionnaire, print it, and sign. No printer? No worries. You and other parties can even sign online. How to Create a ...by C FORM · 2020 — ... SAFE (Simple Agreement for Future Equity) (the. “Securities”) on a best efforts basis as described in this Form C (this “Offering”). The ... “SAFE” means an instrument containing a future right to shares of Capital Stock ... (Please fill out and return with requested documentation.) INVESTOR NAME ... SAFE contracts are the fastest way for entrepreneurs to raise capital for their startup and an easy way for angel investors to invest in ... A primer on Simple Agreements for Future Equity (SAFEs), the investment vehicle used by the Polsky Center, Chicago Booth, and the University ... Apr 12, 2023 — Like convertible notes, SAFE agreements convert to equity upon qualified financing. However, unlike convertible notes, SAFE investments have no ... ... a near equity interest, such as a simple agreement for future equity, or "SAFE agreement", or a convertible debt instrument in the qualified small business. Unlike the original pre-money SAFE - Simple Agreement for Future Equity - the 2018 post-money SAFE uses a post-money valuation cap. The SAFE ... (2)In consideration for the qualified investment, the qualified investor shall receive an equity interest, or a near equity interest, such as a simple agreement ...

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Kentucky Simple Agreement for Future Equity