BarbriSFCourseDetails
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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Wednesday, December 4, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE webinar will discuss the use of a simple agreement for future equity (SAFE) in early-stage financings for startup companies. The panel will discuss how SAFEs have fundamentally changed the speed and simplicity of early-stage fundraising. The panel will also discuss how the SAFE has evolved since its introduction by Y Combinator in 2013 and how despite its simplification, a SAFE may be neither "safe" nor "simple."

Faculty

Gary J. Ross
Managing Partner
Rose Law Group PC

Mr. Ross focuses his practice on securities law, venture capital and private equity, and corporate governance. He has extensive experience advising as to SEC-registered and exempt capital markets transactions. Before founding Ross Law Group in 2013, he worked at Sidley Austin and Alston & Bird, as well as the Department of the Treasury, where he was part of the Troubled Asset Relief Program. Mr. Ross is the host of the American Bar Association podcast VC Law, and has served as an adjunct professor at Brooklyn Law School for the past five years.

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Michelle Rowe Hallsten
Shareholder
Greenberg Traurig LLP

Ms. Hallsten represents emerging and established companies in a variety of practice areas, including general corporate, securities, corporate governance, private debt and equity financings, venture capital, mergers and acquisitions, and public offerings. Her client base covers many industries, including technology, health care, insurance, business services, life sciences, retail, publishing, professional services and real estate. Prior to joining the firm, Ms. Hallsten served as a staff attorney in the Division of Corporation Finance of the Securities and Exchange Commission in Washington, D.C.

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David J. Willbrand
Chief Legal Officer, Head of Legal & Public Affairs
Pacaso

Mr. Willbrand is an experienced chief legal officer, tech executive, trusted advisor, and deal lawyer. Prior to joining Pacaso, Mr. Willbrand founded, grew, and chaired one of the most prominent startup and venture capital legal practices in the Midwest. He also previously worked in the software industry and held the dual role of CFO and General Counsel at a series of venture-backed companies. Mr. Willbrand is the author of “Seed Deals: How to Grow from Startup to Venture Capital,” and teaches at the University of Michigan, Ohio State University, Syracuse University, and University of Cincinnati Colleges of Law.

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Description

A SAFE is a contractual agreement between a startup and its investors. In exchange for the investor's investment, the SAFE provides the investor with the right to equity in the startup when the company raises a future round of funding, typically a preferred stock financing round. The SAFE sets out conditions and parameters for when and how the capital will convert into equity. Unlike a convertible note, a SAFE does not accrue interest or have a maturity date. While the SAFE is not suitable for all financing situations, the terms are intended to be balanced by considering the interests of both the startup and investors.

Despite the simplification provided by SAFEs, over the past few years there has been an increase in additional terms creeping into the SAFE and being presented as part of the "standard" form--in many instances through a side letter. Some startups, desiring to move fast and accept what they believe to be industry-standard terms, do not realize that these additional terms sometimes give investors significant advantages or rights that the investor would not otherwise have with the standard SAFE form, which could impact a startup's ability to attract future capital from investors. Some examples of additional terms include board seats, pro rata rights, and information rights.

The pace of startup financings via SAFEs is expected to increase and evolve. Thus, it is important that both startups and investors understand how the SAFE actually works and the SAFE's impact on dilution. Much of the benefit that can be derived from using a SAFE can be quickly undone by either side's failure to understand or an attempt to get overly creative with additional terms.

Listen as our experienced panel discusses the good, the bad, and the ugly of SAFEs by providing the context ‎necessary to better understand its purpose and underlying terms.

Outline

  1. Things to know about SAFEs
    1. SAFEs are not stock
    2. All SAFEs are not created equal
    3. Components of a SAFE and traditional terms
    4. Understanding what triggers the conversion of a SAFE and what does not
    5. Alternatives to SAFEs and differences
    6. Evolution of the SAFE
  2. Advantages of SAFEs
    1. Quick and simple
    2. Stand-alone agreements
  3. Disadvantages of SAFEs
    1. Stand-alone agreements
    2. Multiple valuation caps and/or discounts
    3. Pro rata rights
    4. Ambiguity regarding proper tax and accounting treatment
  4. Common pitfalls
    1. Not using a consistent SAFE
    2. Negotiating additional terms; over-use of side letters
    3. Understanding and modeling the SAFEs' impact on dilution

Benefits

The panel will review these and other key issues:

  • When is it appropriate to use a SAFE?
  • What are the alternatives to SAFEs?
  • How does a SAFE differ from a convertible note?
  • When and how do SAFEs typically convert?