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

State:
Multi-State
Control #:
US-ENTREP-008-1
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

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.

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.

In a Liquidity Event, a safe holder is entitled to receive a portion of the proceeds equal to the greater of (1) a return of its Purchase Amount and (2) the as-converted proceeds it is entitled to in connection with a Liquidity Event (i.e., the proceeds it would be entitled to had its Purchase Amount been converted ...

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.

Is a SAFE Note a Loan? 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.

A SAFE note term sheet is a legal document that aligns early-stage startup funding interests by outlining the key investment agreement terms for entrepreneurs.

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.

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.

Term sheets are also often used for SAFE or convertible note rounds, but are used less frequently than for priced rounds because of the relative simplicity of SAFE and convertible note legal documents.

A SAFE is an agreement to provide you a future equity stake based on the amount you invested if?and only if?a triggering event occurs, such as an additional round of financing or the sale of the company.

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