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?
Can the Cash SAFE be Assigned?
Program Amount
Conversion to a Fixed Percentage
A fixed percentage SAFE means that in exchange for the investment amount (or deemed investment amount) from the Investor, the Company will issue an exact percentage of the Company’s stock to the Investor in accordance with the terms of that SAFE. On this basis, there is no explicit valuation cap or discount mentioned in the Program SAFE.
Immediately prior to the Equity Financing, SOSV’s equity will represent the exact pre-agreed percentage as set out in the Program SAFE. The new money from the Equity Financing and increase in the ESOP above 10% (if any) will then dilute the SOSV shareholding (and all other shareholders) in the Company. The level of dilution will depend on the price per share and amount of new money raised in the Equity Financing.