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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?

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 Vesting?

Vesting is the process of earning your shares over time. Once your shares have vested you can exercise them. Vesting helps to encourage Founders and employees to commit to the Company for longer than they might otherwise. 

A typical vesting schedule is over four years with a one year cliff. This means that your shares will vest over 4 years, with the first 25% vesting in after your first 12 months with the Company and the remainder typically vesting on a monthly basis until the end of the 4 year term. 

Standard vesting provisions would allow an additional year of accelerated vesting in the event of a sale, merger, consolidation, etc., provided that such Founder is still with the Company at the time of sale, and would have contributed to the value being added that attracted the interest of a purchasing party.

It is important that each Founder (and any other party subject to vesting in your Company) sign a form of Restricted Stock Purchase Agreement (commonly referred to as an “RSPA”) reflecting their particular vesting provisions. 

What are SOSV’s Vesting Requirements for Founders? 

As part of the Program investment,  SOSV requires that all Founders’ shares are subject to four year vesting with a one year cliff, from the date of the SOSV investment.

In the event a Founder leaves the Company prior to an Equity Financing, SOSV requires that all of the respective Founder’s shares, both vested and unvested, are re-purchasable by the Company. The unvested equity would revert to the Company for nominal value and vested equity could be repurchased by the Company for the then fair market value of the vested shares. 

This is required because prior to the Company’s first Equity Financing the Company is in a particularly early stage of their growth and cannot afford for any Founder to leave and retain a portion of the cap table. It is critical that all Founders holding equity in the Company are continuously earning their equity by working and growing the Company over the long term. By ensuring both the vested and unvested equity reverts to the Company the equity can be used  to attract new Founders or employees to move the Company forward. 

You will also need to provide a copy of each Founders RSPA to SOSV prior to the execution of the SAFEs. These RSPAs will need to reflect SOSV’s vesting requirements as set out above. Any amendment to these RSPAs prior to an Equity Financing must be approved by SOSV in advance.

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?