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Should Investors Demand Better Liquidation Terms for SAFEs?

SAFEs (the acronym for “Simple Agreement for Future Equity”) are a widely used financing tool for companies seeking to raise capital quickly and with minimal friction—particularly early‑stage companies that are not yet ready for a priced equity round. In recent years, we have seen many early-stage companies attract M&A interest before their outstanding SAFEs have converted. This trend makes it especially timely to revisit how the standard Y Combinator forms of SAFE address investor payouts when a company is sold prior to conversion, and whether investors should demand more for their high-risk investments.

The Form is Always Wrong

By Dan DeWolf and Samuel Effron

Mintz attorneys are often asked as to why we don’t simply provide “forms” on our website that can be downloaded and used. After all, a number of law firms let you download term sheets and other forms such as SAFEs. Our simple answer is: THE FORM IS ALWAYS WRONG! Legal forms are merely starting points and most forms are typically only half an inch deep. A successful enterprise truly needs so much more depth than what is provided in a basic form.

SAFEs: The (Not So) Simple Agreement for (Potential) Future Equity

By Dan DeWolf and Brian Novell

Historically, most start-up companies were funded either by the offering of equity or by loans in the form of convertible promissory notes. Recently, however, there have been some hybrid instruments created to fund start-ups. Most notably, and quite popular these days, is the use of an instrument called a SAFE. “SAFE” is an acronym for “simple agreement for future equity.”