SAFE

“If you want to fund lifestyle companies, You definitely do not want to use the safe, because then you're going to have this problem all the time.”

“Next thing is that the safes convert into shares, and although the safes themselves don't, ah, state this, the term sheet will usually specify that the safes convert in the pre-money.”

“One of the most important things, I say this a lot, the safe is not a loan. It is not debt. It does not accrue interest. There is no right to be repaid at some point in the future at some maturity date. So please don't call it a safe note.”

“Carolyn is the Is the person who actually invented the safe. She used to be attorney at Wilson Sonsini before coming here, and Kirstie is the CFO of YC.”

“About lifestyle companies and why I think the safe is preferred in general to debt is because we've seen too many times where the fact that there's debt there is used to kill a company that didn't have to die. And it's too easy for investors to call that debt …”

“Series A lead investors are getting more clever about this and realizing that if the safes convert in the pre-money, then the, Lead investors getting less dilution. And really all that's happening is if the safes do convert in the round, they'll just massage t…”

“This is a contractual right. You're breaching the contract if you do not give the safe holders their pro rata right.”

“You don't even need a PPM these days to do a priced round. Nobody, nobody really does those anymore. SAFE is just one document. That's all you need. For a priced round, it's usually just a term sheet.”

“In a dissolution situation, not only is there never any money for stockholders, but there's rarely enough to pay back investors either.”

“They think it's a current valuation of the company. That's really not what it is. All it is, is a way for you to be rewarded for coming in at the earlier stage, ah, when in theory you're investing at a riskier stage.”

“A time when you may not want to use the safe is if you are looking at a company that has already issued convertible promissory notes to earlier investors, and if that's the case, you're going to want to go ahead and just use that same note, not use the safe, a…”

“Typical discount rate ranges in between 10 and 20%, so for example, ah, if the series A round that your SAFE is converting in is the lead investor has priced it at a dollar per share, and you've negotiated a 20% discount, your effective price is 80 cents a sha…”

“Why would you do a safe? Well, because it's simple, it's easy, it's fast, and it's cheap. It's better for founders.”

“It is really dangerous to choose too high a valuation. And in fact, it can kill your fundraising, because it's quite difficult to go to, ah, an investor who might kind of be interested, and you say, I'm gonna raise at a twelve million dollar cap. On my safe. A…”

“Founders have had more, have more control over their companies today than ever in the history of startups. And why is this? It's because when you raise with safes, you don't give up any board seats. All right. There's no board seat nonsense in safes. After you…”

“The founders of Asher came into YC with just the idea. And they were able to raise the first round of funding using safes quickly from angels. This is pretty novel for a biotech company. And using that first million or so that they raised, they could accelerat…”

“The amount of the investment, the valuation cap of the investment, and then the discount. And guess what? Nobody does discounts. So there's only two terms that you really need to discuss when closing a safe.”