From the #1 stage, YC is expected to own 7% of the company. However, new depositors and the option pool should #2 step by step and #3 the YC safe and all other converted safes, provided these safes are standard post-money safes. We have a right to participate pursuant to YC`s agreement to acquire up to 4% of the new securities issued in the financing. If we make use of our right to participate, #3 incorporates us a new additional investment. It is important to note that in the end, YC #3 with less than 7% ownership at the stage, even if we take our 4% participation fee. In recent years, Silicon Valley`s standard financing instrument for startups in the start-up phase has been the conversion note. Today, the standard instrument remains the cabrionote. As always in Silicon Valley, iterates. Enter the scene on the right: the simple agreement for future equity (short for SAFE), designed by Y Combinator s Legal Dream Team. Secure conversion financing: In a price cycle, provided all safes are post-monetary, 3 things usually happen at the same time, but the calculations are ordered specifically: If you are using the safe for the first time or if you are already familiar with safes, we recommend you check out our Safe User Guide (replacing the original Safe Primer).
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. We have a standard agreement for all our investments. We invest $1250,000 in a “post-money” agreement for future capital, and we enter into an agreement with the company and the founders that defines certain specific YC guidelines and rights, including a right to participate in future corporate financing cycles (the “YC agreement”). SAFE is synonymous with Simple Agreement for Future Equity. It`s a smart way for startups to raise debt-free seed funds. Startups are now entering into agreements with investors to obtain a certain amount of money in exchange for shares that the investor will receive at a later date. Our first safe was a “pre-money” safe, because at the time of its launch, startups collected smaller sums of money before collecting a funding cycle (typically a Preferred Stock Round Series).
The safe was a quick and simple way to get the first money into the business, and the concept was that safe owners were only early investors in this future price cycle. But fundraising, staged early on, grew in the years following the introduction of the initial safe, and now startups are raising far more money than the first “seeds” funding cycle. While safes are used for these seed rounds, these towers are really better regarded as totally separate financing, instead of turning “bridges” into subsequent price cycles. Although the safe may not be suitable for all financing situations, conditions must be balanced with the interests of the start-up and investors in mind.