What Is a SAFE? A Closer Look at The Simple Agreement for Future Equity

What Is a SAFE? A Closer Look at The Simple Agreement for Future Equity

Convertible debt is a staple in startup funding. But sometimes the complexity and costs outweigh the benefits. Enter the SAFE, or Simple Agreement for Future Equity. Designed for simplicity on the front-end, a SAFE allows a company to accept outside investment in exchange for stock issued at a later date.

SAFEs usually appear around the seed stage of funding, as it gives founders the chance to raise funding without having to begin the process of setting a valuation or issuing convertible notes. Because there is no debt component, SAFE agreements tend to favor the entrepreneur over the investor.

With that being said, there are important characteristics of a SAFE that you should know before asking your Accounting Professional if it is the right option for your company.

 

 

 

 

 

As with any equity transaction, it is vital that you consult with your legal and accounting representation when considering a Simple Agreement for Future Equity. If you have questions about how a SAFE can work for your company – or if you are interested in a more traditional convertible note transaction – contact us for a free 30 minute consultation.

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