The Complete Guide to SAFEs

Josh Ephraim
Feb 9, 2018 · 5 min read
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The Dorm Room Fund community at All DRF 2018

How SAFEs Work

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Terms of a SAFE

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The “SAFE holder” which here is Dorm Room Fund, ends up with 0.2% of the company. My calculations are based on the more common pre-money method where the new investor and existing stockholders share the dilution caused by the SAFE. You could also hold the Series A investor’s ownership percentage fixed and force existing stockholders to take all of the dilution.

What is a discount?

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Here, the “SAFE holder” get 0.4% of the company when they convert, instead of before when they only got 0.2%.

What is a Valuation Cap?

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The “SAFE holder” gets 0.32% of the company, instead of 0.20% — nearly a third more than without the cap.

What is a Most Favored Nation (MFN) Provision?

What are Pro Rata Rights?


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