Y Combinator Shareholder Agreement

A “SAFE” is an agreement between an investor and an entity that grants the investor rights to the company`s future equity, which are similar to a share warrant, unless a certain price per share is set at the time of the initial investment. The SAFE investor receives future shares in the event of an investment price cycle or liquidity event. SAFEs are supposed to offer start-ups a simpler mechanism to apply for upfront financing than convertible bonds. We have a standard agreement for all our investments. We invest $1250,000 in a “post-money” agreement for future capital, and we enter into an agreement with the company and the founders that defines certain specific YC guidelines and rights, including a right to participate in future corporate financing cycles (the “YC agreement”). Future additional financing rounds: if you make future funding rounds, we will continue to have a right of participation to buy up to 4% of the new securities, but our right of participation is limited to our current property if our property is less than 4% before the turn (so we will never have a very proportional right). The new safe does not change anything to two basic functions that we still consider important for startups: . At the end of 2013, Y Combinator published the Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt. [2] This investment vehicle is now known in the U.S. and Canada because of its simplicity and low transaction costs.

However, as use is increasingly frequent, concerns have arisen about its potential impact on entrepreneurs, particularly where several SAFE investment cycles take place prior to a private equity cycle[4] and potential risks to un accredited crowdfunding investors who could invest in the SAFes of companies that realistically, never receive venture capital financing and therefore never convert to equity. [5] Non-profit organizations receive a $100,000 donation. We receive nothing in exchange for our donation. There are four versions of the new post-money safe as well as an optional letter of receipt. YC Batch Investment: We invest 125k in return for 7% of your business with a Simple Agreement for Future Equity (the “YC Safe”). We think 125k is currently the right amount for founders to run their business and pay expenses for about 5-6 months, and sometimes even more. YC Safe turns into preferred shares when your company takes money by selling preferred shares in a series of shares that we call “Safe Conversion Financing” below (it will usually be your “Series A” or “Series Seed” financing, depending on what happens first). YC, the company, and the founders also sign the YC agreement. On request, we have selected a few documents. You decide which one will be implemented first. If none of them are desired, you can always offer your own version.

The new SAFE forms after YC money can be downloaded here. As the security of a single flexible document without many trading conditions, start-ups and investors save money in legal fees and reduce the time spent negotiating investment terms. Startups and investors generally have only one point to negotiate: the valuation cap. Since a safe does not have an expiry date or maturity date, no time or money should be spent on extending maturities, reviewing interest rates or otherwise. Whether you`re using the safe for the first time or are already familiar with safes, we recommend reading our Safe User Guide. The Safe User Guide explains how the safe converts with sample calculations, as well as other details on the secondary letter pro-rata, explanations of other technical changes we made to the new safe (for example. B the language of tax processing) and suggestions for optimal use.