Puerto Rico Term Sheet — Simple Agreement for Future Equity (SAFE) is a legal document used in startup financing that outlines the terms and conditions of an investment agreement. This agreement is designed to simplify the fundraising process for early-stage companies in Puerto Rico. The Puerto Rico Term Sheet — Simple Agreement for Future Equity (SAFE) establishes a framework for startups to secure funding without setting an initial valuation. Instead of issuing shares or convertible notes, SAFE grants investors the right to obtain equity in the company in the future, based on predefined triggering events such as a subsequent funding round or acquisition. There are several types of Puerto Rico Term Sheet — Simple Agreement for Future Equity (SAFE) that vary based on the specific terms and conditions stated within the agreement. These different types include: 1. Valuation Cap SAFE: This type of SAFE allows investors to set a maximum valuation at which their investment will convert into equity. If the company's valuation exceeds the predetermined cap, the investor's equity stake will be based on the cap rather than the higher valuation. 2. Discount SAFE: A Discount SAFE provides investors with the opportunity to purchase equity at a reduced price compared to future investors. This type of SAFE offers investors a discount percentage on the price per share at which their investment converts into equity. 3. Most Favored Nation SAFE: A Most Favored Nation SAFE guarantees that if the company issues new Safes with more favorable terms, the investor will automatically receive those improved terms. This type of SAFE provides investor protection against dilution and ensures they will receive the benefit of any improved investment terms. 4. Thematic SAFE: A Thematic SAFE allows investors to choose a particular theme or industry focus for their investment. This type of SAFE caters to investor preferences by aligning their investment with specific sectors or emerging trends. The Puerto Rico Term Sheet — Simple Agreement for Future Equity (SAFE) serves as a flexible and efficient investment instrument, enabling startups in Puerto Rico to secure funding while deferring the complexities associated with traditional equity investments. It offers clear terms, investor protection, and accommodates various investor preferences, making it a valuable financing tool for startups in Puerto Rico.
Puerto Rico Term Sheet - Simple Agreement for Future Equity (SAFE)
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FAQ
SAFE funds on the balance sheet When funds come in from a SAFE note, they are added to cash as a debit. We also credit the SAFE notes line item in your balance sheet. Since SAFE notes don't have a maturity date, they don't have to be paid back in 12 or 24 months.
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.
CREATE A FREE PROJECT POSTING. 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 good example of a safe term sheet is one that gives both parties enough time to negotiate, but not so much time that it becomes an obstacle. This investment instrument allows investors to provide capital to a startup in exchange for the right to receive equity at a later date.
FAQs Determine the Term Sheet Agreements' purpose. Summarise the terms and conditions in a few words. List the terms of the offer. Dividends, Liquidation Preference, and Provisions should all be included. Determine your participation rights. Establish a board of directors.
But no matter who the investor is, a term sheet will always contain six key components, including: A valuation. An estimate of what a company is worth as an investment opportunity. ... Securities being issued. ... Board rights. ... Investor protections. ... Dealing with shares. ... Miscellaneous provisions.
A SAFE note is a security that is going to convert to stock at a future point, usually at a pre-negotiated price cap. Let's look at an example. A person might invest in a SAFE note with a $10 million cap. If the company is bought for $100 million, that's great news.
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.