Legal FAQs
Key Considerations When Deciding Where To Incorporate
How To Incorporate a Delaware C Corp Through Clerky?
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?
Structure of the SOSV Program Investment
Cash SAFE
Program SAFE
Additional 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?
A liquidity event is generally a good thing for your Company.
Generally, a Liquidity Event includes a change of control, a listing, or an Initial Public Offering (IPO). If a Liquidity Event occurs prior to the conversion or termination of the SAFE then the startup will generally be liable to pay the SOSV the greater of:
- a multiple of the SAFE investment amount; or
- the amount SOSV would have received in connection with such a Liquidity Event if SOSV’s purchase amount converted to equity immediately prior to the Liquidity Event.
Most people don’t realize, for example in an acqui-hire situation the Founders do very well via stock options in the purchasing entity, enhanced salary levels, etc., whereas investors may not get any significant return. The Liquidity Event clause aligns the investors with the Founders so that investors can get some level of return on their investment.