SAFE agreement template

Simple Agreement for Future Equity (Post-Money SAFE)

This instrument, and any shares issued under it, have not been registered under federal or state securities laws. They may not be sold, pledged or otherwise transferred unless they are registered or an exemption from registration applies.

In exchange for the payment by [Investor's legal name] (the "Investor") of [Purchase amount] (the "Purchase Amount") on or about [Date of the SAFE], [Company's legal name], a [State of incorporation] corporation (the "Company"), issues to the Investor the right to certain shares of the Company's capital stock, on the terms of this Simple Agreement for Future Equity (this "Safe").

The Post-Money Valuation Cap is [Post-money valuation cap]. The Discount is [Discount]. If the Discount is stated as None, no Discount applies and the Conversion Price is the Safe Price.

1. Equity financing

If there is an Equity Financing before this Safe ends, then at the initial closing of the Equity Financing this Safe will automatically convert into the number of shares of Safe Preferred Stock equal to the Purchase Amount divided by the Conversion Price.

As part of that conversion, the Investor will sign the agreements that the other investors in the Equity Financing sign, changed only to reflect the Safe Preferred Stock, provided that those agreements ask no more of the Investor than they ask of the other investors.

2. Liquidity event

If there is a Liquidity Event before this Safe ends, the Investor will automatically be entitled, subject to the liquidation priority below, to receive the greater of (a) the Purchase Amount (the "Cash-Out Amount") and (b) the amount payable on the number of shares of Common Stock equal to the Purchase Amount divided by the Liquidity Price (the "Conversion Amount").

If the money and property available to pay the Investor and the holders of other Safes and preferred stock is not enough to pay their Cash-Out Amounts in full, it will be shared among them in proportion to the full amounts owed to each.

3. Dissolution event

If there is a Dissolution Event before this Safe ends, the Investor will automatically be entitled, subject to the liquidation priority below, to receive an amount equal to the Purchase Amount, payable immediately before the Dissolution Event is completed.

4. Liquidation priority

In a Liquidity Event or a Dissolution Event, the Investor's right to receive its Cash-Out Amount or the Purchase Amount is:

(a) junior to payment of the Company's outstanding debt and the claims of its creditors;

(b) on a par with payments for other Safes and for preferred stock, as described in the section on liquidity events; and

(c) senior to payments for Common Stock.

The Investor's right to the Conversion Amount ranks on a par with Common Stock, as if the Investor held those shares.

5. Termination

This Safe ends, and the Company's obligations under it are fully met, when (a) shares are issued to the Investor under the section on equity financing, or (b) the Company pays, or sets aside for payment, the amount due to the Investor under the section on liquidity events or the section on dissolution events.

6. Definitions

In this Safe:

(a) "Equity Financing" means a genuine transaction or series of transactions, with the main purpose of raising capital, in which the Company issues and sells Preferred Stock at a fixed valuation.

(b) "Standard Preferred Stock" means the series of Preferred Stock issued to the investors who invest new money in the Company at the initial closing of the Equity Financing.

(c) "Safe Preferred Stock" means a series of Preferred Stock with the same rights, privileges, preferences and restrictions as the Standard Preferred Stock, except that its liquidation preference per share, and any price used to calculate its conversion and dividend rights, is the Conversion Price.

(d) "Conversion Price" means the lower of the Safe Price and, if a Discount applies, the Discount Price.

(e) "Safe Price" means the Post-Money Valuation Cap divided by the Company Capitalization.

(f) "Discount Price" means the price per share of the Standard Preferred Stock multiplied by the difference between 100% and the Discount (for a 20% Discount, by 80%).

(g) "Company Capitalization" means, as of immediately before the Equity Financing and without counting anything twice, the total of (i) all shares of the Company's capital stock issued and outstanding, counting preferred stock as if converted into Common Stock; (ii) all shares issuable under outstanding options, warrants and promised options; (iii) all Converting Securities, including this Safe, as if converted; and (iv) all shares reserved and available for future grant under any equity incentive plan, but not any increase to that reserve made in connection with the Equity Financing.

(h) "Converting Securities" means this Safe, other Safes, convertible promissory notes and other securities convertible into the Company's capital stock, other than options and warrants.

(i) "Liquidity Event" means a Change of Control, a Direct Listing or an Initial Public Offering.

(j) "Change of Control" means (i) any person or group becoming the owner of more than half of the Company's outstanding voting securities that elect directors; (ii) a merger or consolidation after which the Company's voting stockholders from before it hold less than half of the voting power of the surviving company; or (iii) a sale of all or substantially all of the Company's assets.

(k) "Initial Public Offering" means the closing of the Company's first firm-commitment underwritten public offering of Common Stock, and "Direct Listing" means the Company's first listing of Common Stock on a national securities exchange without an underwritten offering.

(l) "Liquidity Price" means the Post-Money Valuation Cap divided by the Liquidity Capitalization, which is the Company Capitalization calculated as of immediately before the Liquidity Event, but without the shares reserved and still available for future grant under any equity incentive plan.

(m) "Dissolution Event" means a voluntary end to the Company's operations, a general assignment for the benefit of its creditors, or any other liquidation, dissolution or winding up of the Company, voluntary or not, other than a Liquidity Event.

(n) "Safe" means any simple agreement for future equity issued by the Company to raise capital, including this one.

7. Company representations

The Company represents to the Investor that:

(a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, with the power to carry on its business as it is now conducted;

(b) signing, delivering and performing this Safe is within the Company's powers, has been authorized by its board of directors, and makes this Safe a valid obligation of the Company, enforceable under its terms except as limited by bankruptcy and similar laws and by general principles of equity;

(c) signing and performing this Safe does not violate the Company's certificate of incorporation or bylaws, any law or court order that applies to it, or any material agreement it is party to;

(d) no consent or approval of any government authority is needed for the Company to sign and perform this Safe, other than filings under securities laws; and

(e) to its knowledge, the Company owns or has the right to use the intellectual property it needs to carry on its business as now conducted, without infringing the rights of others.

8. Investor representations

The Investor represents to the Company that:

(a) it has full power and authority to sign and perform this Safe, and this Safe is a valid obligation of the Investor;

(b) it is an accredited investor as defined in the rules of the US Securities and Exchange Commission, or otherwise eligible to acquire this Safe under the securities laws that apply to it;

(c) it is acquiring this Safe for its own account, for investment, and not with a view to selling or distributing it;

(d) it understands that this Safe and any shares issued under it are not registered, may have to be held indefinitely, and can be resold only if registered or exempt from registration; and

(e) it has the knowledge and experience in financial and business matters to evaluate this investment, can bear the loss of the entire Purchase Amount, and has had the chance to ask the Company questions and get answers.

9. No stockholder rights

Until shares are issued to the Investor under this Safe, the Investor is not a stockholder of the Company because of this Safe. It has no right to vote, to receive dividends, to receive notice of stockholder meetings, or to consent to any corporate action as a stockholder.

10. Transfers

Neither party may transfer this Safe, or any right under it, without the other party's written consent, except that the Investor may transfer it to an affiliate, including a fund managed by the same investment manager, and the Company may transfer it as part of a reincorporation that changes only its state of incorporation. Any transfer must comply with securities laws.

11. Amendments and waivers

Any term of this Safe may be amended or waived with the written consent of the Company and either (a) the Investor, or (b) the holders of a majority of the total Purchase Amounts of all Safes with the same Post-Money Valuation Cap and Discount as this Safe, provided that the change applies to all of those Safes in the same way.

12. Tax treatment

The Company and the Investor intend that this Safe be treated as stock for US federal and state income tax purposes, and will not take a position inconsistent with that treatment on any tax return or in any tax proceeding unless required by law.

13. General terms

The laws of [State of incorporation] govern this Safe, without regard to its rules on conflicts of law.

This Safe is the whole agreement between the parties about its subject. If a court finds part of it unenforceable, the rest remains in effect.

Notices under this Safe must be in writing and may be sent by email to the address each party has given the other for that purpose.

The Company is not a fiduciary of the Investor because of this Safe.

The parties may sign this Safe electronically and in separate copies, which together form one agreement.

The Company and the Investor have signed this Safe on the date stated above.