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Incorporation

Key Considerations When Deciding Where To Incorporate

How To Incorporate a Delaware C Corp Through Clerky?

Form Of SOSV Program Investments

How are SOSV Program Investments Made?

What Is A SAFE?

What Does Post-Money Mean?

How Does a Post-Money Fixed Percentage SAFE Convert to Equity?

Here’s an example of how a post-money fixed percentage SAFE converts to equity:

SOSV invests $275,000 into ABC Inc. on 1st of June 2024 using a post-money SAFE.

The SAFE provides that immediately prior to an “Equity Financing” (as defined in the SAFE and explained below in this FAQ) the $275,000 investment will convert to x% of the “Company Capitalisation”.

The definition of Company Capitalisation in a post-money SAFE usually looks something like this:

“Company Capitalization” is calculated immediately prior to the Equity Financing and (without double counting, in each case calculated on an as-converted to Common Stock basis):

  • Includes all shares of Capital Stock issued and outstanding;
  • Includes all Converting Securities;
  • Includes all (i) issued and outstanding Options and (ii) Promised Options; and (iii) an Unissued Option Pool of at least 10%;
  • Excludes, notwithstanding the foregoing, any increase to the Unissued Option Pool in connection with the Equity Financing.

This means that all shares (common and preferred) issued and outstanding, all convertible instruments issued, and all options (i.e. the ESOP) are included in the calculation of SOSV’s post-money equity holding. Please note this is just an example for discussion purposes only – the definition of Company Capitalization may vary and change over time from contract to contract.

Structure of the SOSV Program Investment

Structure of the SOSV Program Investment

Cash SAFE

Program SAFE

Additional Cash SAFE

Cash SAFE

Cash Amount

Conversion – Valuation Cap Or Discount?

What Events Trigger Conversion of Investment to Equity?

What is an Equity Financing?

What Calculation is Used to Determine the Number of Shares Issuable to the Investor Upon Conversion of the Cash SAFE?

What is an Optional Conversion?

What is a Liquidity Event?

What is a Dissolution Event?

What is a Review Conversion

What is a Pro Rata Right?

What is a Most Favored Nations Clause?

What Is an Employee Share Option Plan (ESOP) or Unissued Option Pool?

Can the Cash SAFE be Assigned?

Program SAFE

Program Amount

Conversion to a Fixed Percentage

What Events Trigger Conversion of Investment to Equity?

What is an Equity Financing?

What Calculation Is Used to Determine the Number of Shares Issuable to the Investor Upon Conversion of the Program SAFE?

What is an Optional Conversion?

What is a Dissolution Event?

What is a Liquidity Event?

What is a Review Conversion?

What is a Pro Rata Right?

What is an Employee Share Option Plan (ESOP) or Unissued Option Pool?

What Representations and Warranties are Given with Respect to the Company’s Intellectual Property?

What are SOSV’s Vesting Requirements?

What is a Most Favored Nations Clause?

What is a Put Right?

What is an Observer Right?

What are Information Rights?

What is the Major Investor Designation Clause?

What is a Pre Conversion Pro Rata Right?

What is a First Financing Right?

What is the Investor Consent Matters Clause?

What are the Program Participation Requirements?

What Happens if a Participant is Removed From the Program?

What Does the Exit Endeavour Clause Mean?

Can the Program SAFE be Assigned?

Optional Additional Cash SAFE

What is an Additional Cash SAFE?