What do SAFE Agreements mean? SAFE stands for Simple Agreement for Future Equity.
In this article, we would be explaining the meaning and how it works for new businesses or company start-ups.
SAFE Agreements Explained In Details
SAFE Agreements are a relatively new kind of contract that was developed in 2013 by the American start-up accelerator Combinator.
It is a basic agreement that is frequently used as a type of finance contract that start-ups may utilize as a way to generate money during the initial phases of the business, popularly known as the seed financing stage.
According to Thomson Reuters , A new business may utilize a simple agreement for future equity (SAFE) finance arrangement to raise money during its seed funding rounds. Some people think of the instrument as a more founder-friendly substitute for convertible notes.
A SAFE is an investment agreement between a startup and an investor that grants the investor the right to acquire equity in the company upon the occurrence of specific triggering events, such as: Future equity financing (also known as Next Equity Financing or Qualified Financing), which is typically led by an institutional venture capital (VC) fund.
References
1. Y- Accelerator.com – (www.ycombinator.com )Author : Carolyn Levy published – September 2018(updated March 2021)
2. Thomson Reuters practical law- (Uk.practicallaw.Thomson Reuters.com)
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