Once the terms have been agreed and the SAFE has been signed by both parties, the investor sends the agreed funds to the company. The company uses the funds in accordance with the applicable conditions. The investor only receives equity (safe preferred share) when an event mentioned in the SAFE agreement triggers the conversion. As a start-up, you undoubtedly go through agreements with other companies, suppliers, contractors, investors and many others. A lesser-known agreement is the Simple Agreement for Future Equity (SAFE). These agreements can be important for a startup`s success, but not all SAFE agreements are the same. SAFE agreements have a lot to offer. But what benefits the startup, such as the lack of standardization, can also hurt the startup if the deal is not designed and negotiated in a professional and strategic way. Some issuers have offered a new type of collateral as part of some crowdfunding offerings – which they have called safe. The acronym stands for Simple Agreement for Future Equity. These securities carry risk and are very different from traditional common shares.
As the Securities and Exchange Commission (SEC) states in a new Investor Bulletin, a SAFE offering, whatever its name, cannot be „simple” or „safe.” If you have any questions regarding simple agreements for future equity or other equity financing matters, lawyers from Parker McCay`s Corporate and Commercial Lending divisions are at your disposal. . . .