The SAFE pre-money is standardized to a pre-money valuation. Investors get proportional rights. What are pro-rata rights? The right to pro-rata is the right of the SAFE investor to acquire more shares in the company if the company makes a new financing cycle. The advantage of this SAFE is that it favors businesses because you can delay the valuation of your business. This agreement (this «agreement») is concluded on or around [the date of the guarantee] in connection with the purchase of this specific simple agreement for future capital with a «post-money valuation cap» (the «Investor`s Safe») issued by [the name of the company] (the «company») on the day or beyond the date of that agreement. As an essential incentive for the investor`s investment, the company agrees with the provisions of this agreement. The activated terms used here have the meanings indicated in the investor`s safe. To determine which version is right for your business, you must first consider the amount of funds you want to spend on this cycle. Pre-Money SAFE is usually the best option for small initial financing rounds. With Post-Money SAFE, you can closely monitor ownership and dilution changes during this fundraising round and in future rounds. You can also negotiate pro-rata rights.
Post-Money SAFE is often the SAFE of choice for companies that are confident that their next round of fundraising will be the turn of action. Whether you`re using the safe for the first time or are already familiar with safes, we recommend reading our Safe User Guide. The Safe User Guide explains how the safe converts with sample calculations, as well as other details on the secondary letter pro-rata, explanations of other technical changes we made to the new safe (for example. B the language of tax processing) and suggestions for optimal use. Future additional financing rounds: if you make future funding rounds, we will continue to have a right of participation to buy up to 4% of the new securities, but our right of participation is limited to our current property if our property is less than 4% before the turn (so we will never have a very proportional right). A simple agreement for Future Equity (SAFE) is an agreement between you and an investor (the founder) to get money now, in exchange for the promise that the investor will receive equity in your business at an undetermined time in the future, when your business holds a price round (for example. B, Series A). Post-Money SAFE is an improved version of the original safe. What`s the difference? This cycle can be considered a seed cycle, and the valuation ceiling is post-money, both startups and investors have clarity about ownership and future dilution. They also removed the proportional duties that existed in the original SAFE, unless the company agreed to grant it to the investor.
A major drawback is that saFes post-money investors will only participate in a dilution of subsequent financing cycles when the post-money SAFE is transformed into a price equity round. POST-money investors SAFE get a better offer than pre-money safe holders on the heading table. The trade-off is to improve the clarity of ownership and future dilution (in order to boost investor confidence and thus strengthen the capital invested). With participation rights or participation rights, investors can invest additional funds to maintain their ownership during equity financing after the financing that initially converted SAFE into equity.