Sample Safe Agreement

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If you`re looking for a sample safe agreement, you`re likely in the process of securing funds for your startup or small business. A safe, or Simple Agreement for Future Equity, is a popular way for startups to raise capital from investors without having to worry about setting a valuation for their company. Instead, investors provide funds in exchange for the promise of equity at a later date.

A safe agreement is considered a “safe” investment for investors in that it offers protections similar to a convertible note, but without the debt component. While a safe agreement can be a great way to raise capital, it is important to ensure that the agreement is properly drafted to protect the interests of both the company and the investor.

Here are a few key components that should be included in a sample safe agreement:

1. Discount or valuation cap: In exchange for their investment, investors will be promised equity in the company at a later date. To incentivize investors, a discount or valuation cap may be included in the agreement. This provides investors with a better return if the company`s valuation increases in the future.

2. Conversion event: The safe will convert to equity at a specified event, such as a future funding round or acquisition. It is important to clearly outline the terms of this conversion event in the agreement.

3. Dilution protection: Investors want to make sure that their percentage of ownership in the company is protected from dilution in the future. This can be included in the form of anti-dilution provisions in the safe agreement.

4. Governing law: The safe agreement should specify the governing law that will apply in the event of any disputes.

5. Representations and warranties: Both the company and the investor should provide representations and warranties in the safe agreement. This ensures that both parties understand the terms of the agreement and have the legal capacity to enter into it.

When drafting a safe agreement, it is important to work with a qualified attorney to ensure that the agreement complies with all applicable laws and regulations. A well-drafted safe agreement can provide a valuable tool for securing capital for your startup or small business, while protecting the interests of all parties involved.