The SAFE is a kind of warrant that gives investors the right to obtain shares of the company, usually preferred shares, if and if there is an upcoming valuation event (i.e. the next time the company increases, acquires “valued” equity or submits an IPO). Our updated safes are therefore post-money safes. By “post-money” we take the measure of the ownership of safe holders after (post) all the safe money has been charged – which is now its own turn – but always before (before) the new money in the price cycle that transforms and dilutes the safes (usually the A series, but sometimes Series Seed). Post-money-safe has what we consider to be a great advantage for founders and investors – the ability to immediately and accurately calculate the amount of ownership of the company sold. While this concept fits the original vault concept, it made less sense in a world where vaults have become independent funding cycles. Thus, the “old” proportional right is removed from the new safe, but we have a new (optional) letter that offers the investor a proportional right in the financing of the Series A Preferred Stock, based on the investor`s as-converted secure ownership, which is now much more transparent. Whether or not a startup and an investor take the secondary letter with a safe is now a decision that the parties will make, and it can depend on a large number of factors. Among the factors to be taken into account, there may be (among others) the purchase amount of the safe and the amount of future dilution that the proportional fee will entail for the founders – an amount that can now be predicted with much more precision if post-money safes are used. The exact conditions of a SAFE vary. However, the basic mechanism[1] is that the investor provides specific financing to the company when it is signed. In return, the investor will subsequently receive shares of the company related to certain contractual liquidity events. The primary trigger is usually the sale of preferred shares by the company, typically as part of a future price increase cycle.

Unlike a direct share purchase, shares are not valued at the time of signing the SAFE. .