Convertible notes and Simple Agreements for Future Equity (SAFEs) are widely used by startups to raise early-stage capital. However, where the terms of those agreements are overly generous to the early-stage investor, those agreements can create complexities in future financing rounds, particularly in the form of “liquidation preference overhang”. What is Liquidation Overhang? Liquidation overhang …
What is a SAFE? An equity instrument that usually comes in one of three types: Discount, Valuation Cap, Most Favord Nation (MFN). Read More>>
As founders look to raise capital, Simple Agreements for Future Equity (SAFEs) present a streamlined option. However, like any financial instrument, SAFEs come with their own set of risks. Understanding these risks is vital for making informed decisions and protecting the future of the business. 1. Valuation Cap Uncertainty SAFEs come in different forms. One …