As an example of a valuation cap used for conversion, let`s say we have a SAFE investment of $500,000 with a valuation cap of $5,000,000. In the event of a conversion, the SAFE investor receives shares at the same value as the equity investor (the investor(s) whose investment triggers the conversion), with the valuation cap acting as a safety barrier to prevent the SAFE investor from converting this price. The valuation cap is currently based on the initial value of the equity financing, which means that if the equity financing has an initial valuation of $2,000,000, the SAFE investor`s investment is included in that amount, which, in our example, means that the SAFE investor would hold 25% of the issued and outstanding shares immediately prior to the closing of the investment. Il miglioramento della filiera italiana delle startup si basa sulla adozione (o per meglio dire il “copiare”) delle best practice internazionali, e il SAFE è una di queste. Ad oggi nel diritto italiano lo schema del SAFE è pienamente sdoganato da CDP Venture Capital attraverso gli investimenti in “convertendo” usati da Fondo Rilancio attraverso scrittura privata. So what`s going on? Focusing on making the SAFE fast, easy, and cheap can cause some founders to simply download, fill in the blanks, and run with it or some form of it. Sure, this is a potentially dangerous way to deal with a legal document, but there`s something about SAFE that makes founders feel safe. If you`ve spent a lot of time in the startup ecosystem over the past five years, you`re probably familiar with the concept of the simple agreement for future equity, or SAFE. SAFE was first introduced by YCombinator in 2013 and has established itself as a fast and efficient way to raise capital quickly. While SAFERs are referred to as “simple” (that`s right in the name!), SAFERs can often be confusing to the uninitiated. To understand what a SAFE is, it is also important to know what it is not.

It is not an instrument of debt. Nor are they common shares or convertible bonds. However, SAHE`s convertible bonds are similar in that they can provide equity to the investor in a future series of preferred shares and may include valuation caps or discounts. However, unlike convertible bonds, SAFERs do not incur interest and do not have a specific maturity date and may never be triggered to convert safe into shares. With regard to the SAFE agreement, the US model sets a conversion price that must not exceed a certain upper limit according to which the company abandons shares as part of a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions very similar to those of the usual “preferred shares”. In addition, it also sets a reduced call price, which, according to experience in the United States, is in the range of 15-20%, while there is no provision on a future maturity for the repayment of the investment. The introduction of these tools, specific to foreign ecosystems such as Silicon Valley, and the difficulties in raising sufficient capital to support the development of start-ups, particularly with regard to the early/seed phase, have prompted several actors to opt for alternative instruments to equity investments developed either “at national level” or within the framework of common law systems. The SAFE agreement – developed and used by the world-renowned Californian incubator “Y Combinator” – is neither a debt instrument, unlike convertible bonds, nor an equity instrument, as it does not give its holder the right to share profits or voting rights as a shareholder. Rather, it is a financial instrument that includes a potential right to purchase preferred shares.

If a value per share is set in the equity participation, this is a simple calculation, as shown in the following table: There is nothing to prevent the adaptation of GFS regulations to best practices resulting from the implementation of the SAFE agreement in the United States. This is the case of “acceleration clauses”, which allow the investor to convert his investment before the initial date set in the agreement in the event of equity funding/liquidity events, i.e. an acquisition of the start.dem-up or a capital increase that attracts new investors. This type of clause is also commonly used in convertible bonds. Some clauses, on the other hand, cannot be transferred to an SFP. This is the case for depreciation clauses in connection with dissolution events, such as: (i) the voluntary suspension of the Company`s business activities; (ii) the transfer of the company`s assets to creditors or (iii) the liquidation proceedings of the company, both voluntarily or not. .