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?
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?
An ESOP or unissued option pool is an allocation of stock in the Company from which options to employees, advisors, etc. may be issued. Options are basically a right to purchase shares in the Company at a future date. Options may be issued to employees, directors, advisors, officers, service providers, etc., generally at the discretion of the Board of Directors.
SOSV requires each investee startup participating on an SOSV Program to create and maintain an ESOP of at least 10% of the Company’s total issued stock on a fully diluted basis right up until immediately prior to an Equity Financing. An ESOP can enable a cash-strapped startup, that may not yet be in a position to offer market-rate salaries, to attract high-caliber employees, by affording the opportunity to those candidates to earn equity in a potentially successful startup, combined with an initially modest salary.
An ESOP can give employees the incentive to commit to the startup in order to achieve ultimate value through their ESOP holdings. Employees will experience the value of their contribution over time as the Company’s stock value increases as a whole.