Read on Twitter
1/ A thread of key insights I've learned about SAFEs over the years that every early stage entrepreneur should know. Check out my thoughts on how SAFEs can be dangerous on @BetaKit here: https://betakit.com/how-safes-can-be-dangerous-what-early-stage-entrepreneurs-should-know/
2/ Why Now
SAFEs are popular for early stage fundraising and bridge rounds. With the funding environment around Covid-19 right now, there are more SAFEs being issued than usual. This makes it more important than ever for founders to understand their contours.
SAFEs are popular for early stage fundraising and bridge rounds. With the funding environment around Covid-19 right now, there are more SAFEs being issued than usual. This makes it more important than ever for founders to understand their contours.
3/ Dilution
If you don't track the dilution you are taking on from issuing SAFEs, it can be shocking to see your ownership in your company drop dramatically when they convert to equity. Track your dilution as you issue SAFEs by creating a dynamic cap table from the start.
If you don't track the dilution you are taking on from issuing SAFEs, it can be shocking to see your ownership in your company drop dramatically when they convert to equity. Track your dilution as you issue SAFEs by creating a dynamic cap table from the start.
4/ Valuation
A key term of your SAFE is the valuation cap. This is not the valuation of your company! It is dilution protection for early investors in your company. Don't get hung up comparing your valuation cap with your next round valuation - they are different things!
A key term of your SAFE is the valuation cap. This is not the valuation of your company! It is dilution protection for early investors in your company. Don't get hung up comparing your valuation cap with your next round valuation - they are different things!
5/ Non-Standard Terms
A great feature of SAFEs is that their terms are standard (set by @ycombinator) Watch out for SAFEs with very off-market terms. These can make it tough to raise your next round. Check out the link above for tips on what to look for.
A great feature of SAFEs is that their terms are standard (set by @ycombinator) Watch out for SAFEs with very off-market terms. These can make it tough to raise your next round. Check out the link above for tips on what to look for.
6/ Conclusion
Over the years as an early stage investor and lawyer, I've seen the good, the bad, and the ugly of issuing SAFEs. Take an hour this weekend and actually read the YC model SAFE. It's only 7 pages! Trust me, you will be amazed at what you learn.
Over the years as an early stage investor and lawyer, I've seen the good, the bad, and the ugly of issuing SAFEs. Take an hour this weekend and actually read the YC model SAFE. It's only 7 pages! Trust me, you will be amazed at what you learn.
