SeedSAFE: Key terms and features explained
Need a fast way to raise investment before a funding round? Our SeedSAFE simple agreements for future equity allow start...
Introducing SeedSAFE – the cost-effective, flexible way for startups to create, negotiate and sign a standard YC SAFE, or, for those who need something a little more flexible, our enhanced SeedSAFE.
In this article, we explain what SeedSAFE is and how to create one on SeedLegals.
In the last few years, the YC SAFE has emerged as the standard for startups looking to raise investment in the US and across Asia-Pacific. One of the hardest hurdles startups face with raising early-stage investments is determining what their valuation should be. With the YC SAFE, the investor gets their shares when the startup raises a full funding round (e.g., pre-seed; Series A), at which point questions like valuation are easier to address. Easy to create, easy to read, the YC SAFE made it easier for startups and investors to get a deal done quickly and decide the valuation later.
When we expanded to Asia, we launched SeedFAST in Singapore and Hong Kong. SeedFASTs are a fast and easy way to raise from individual investors before a funding round. Like the YC SAFE, investments made by a SeedFAST convert into shares when the company does a funding round, at a valuation to be determined in the funding round. SeedFAST has become the de facto standard in the UK (over 10,000 SeedFASTs have been created by UK startups, raising over £500M to-date).
But we realised that while both startups and investors loved the SeedFAST, there was demand for the YC SAFE in the region too.
So we’ve made it simple to create a Hong Kong-law version of the YC SAFE, a SeedFAST or an enhanced version of the YC SAFE with SeedSAFE (more on this below).
There are a number of reasons you might opt to create your SeedSAFE in the form of a YC SAFE or a SeedFAST. But the key reason you’ll likely choose one over the other is investor-preference and familiarity. The more accustomed your investors are to a certain style of an agreement, the quicker it can be to negotiate and close a deal. In this part of the world, your investors are likely more familiar with the YC SAFE. But if you’re raising from UK investors, they might prefer SeedFAST.
When we designed SeedFAST in the UK, we included a number of features that don’t exist in the standard YC SAFE such as a longstop date, conversion to a specific share class or conversion at a specific fixed valuation, regardless of the startup’s valuation at the next funding round. We also built-in the option to include additional investor rights such as board observer rights, information rights, participation rights and a most favoured nation clause.
Looking at our data from more than 10,000 SeedFASTs on the SeedLegals platform, we realised that even startups looking to raise capital with the YC SAFE would benefit from these features. So with SeedSAFE you can create a standard YC SAFE, a SeedFAST, or an enhanced version of the YC SAFE that follows the same format as the standard version, but has the option to include any or all of the additional features that were previously only available with SeedFAST. You can also toggle between any of them at any point of your negotiations, so you don’t need to commit until the deal has been signed.
One more thing – we’ve included a Cover Letter (for all SeedSAFEs) that explains deal terms in plain English, so even if you create an enhanced version of the YC SAFE with SeedSAFE, your investor can see at a glance the key terms of your SeedSAFE and the enhancements that have been made.
It’s as easy as that – you can log in and create yours now.
Ready to get started or want a little more support to decide whether you should create a YC SAFE, a SeedFAST or an enhanced version of the YC SAFE? We’re here to help. Get in touch with our team and we’ll arrange a call to guide you through how SeedSAFE works, answer your questions and help you get started.
*Disclaimer: The information contained in this article does not constitute and should not be treated as legal, tax, accounting, or financial advice.