Mike Whelan [00:17:36] Yes, I jump a little to this miscellaneous and I love the different word about a contract. But moving on to the error in five in a, he says that any provision of this safe can be changed, cancelled or modified by written consent of the company and either the investor, who in this case is Y Combinator or the majority in the interest of all economies then in circulation with the same post-money valuation cap and discount rate. And then there are a number of qualifications on top of that. Tell me about this section about not doing it or changing it already. Very simple, very wide and complete handshake agreement. 1. Automatic conversion to the sale of shares, no threshold of amount a. If the pre-currency > Secure Valuation Cap, the conversion takes place at Value Cap b. If pre-money 2. In liquidation, the conversion takes place at the valuation limit, the fair value of the common shares at the time of liquidation or the return on the money invested. YC Batch Investment: We invest $125,000 in exchange for 7% of your business with a simple “post-money” agreement for future equity (the “YC Safe”). We believe that $125,000 is currently the right amount for founders to run their business and pay expenses for about 5-6 months and sometimes even longer.
YC Safe is converted to preferred shares when your company raises funds by selling preferred shares in a low-cost round, which we refer to below as “Safe Conversion Financing” (this is usually your “Series A” or “Seed Series” financing, whichever comes first). YC, the company and the founders also sign the YC agreement. Y Combinator introduced the Safe (simple deal for future actions) at the end of 2013 and has since been used by almost all YC startups and countless non-YC startups as the primary fundraising tool at an early stage. GUEST: Matias Vukusic is a Chilean startup lawyer who handles many SAFE deals in the venture capital industry. He can be reached on Twitter, LinkedIn or his website vukusic.cl. Mike Whelan [00:01:37] like you, which sounds like a cool place. I was looking at pictures the other day when I was talking to Matias, and I`m going to move. By the way, we have an exciting announcement at the end of this conversation with Matias. It has to do with things that are K.
Bueno, so we`ll talk about that later. But for now, we want to talk about this document, Matias, I`m just going to share my screen very quickly. This is the secure document. The simple agreement for the future equity document. This one comes from Y Combinator is where we shot it. And if you look at this thing, guys, it`s about six pages. So let`s talk about it, Matias, before getting to the heart of the matter. What is this document? What is it used for? Why is this important? When will a lawyer see this thing? Matias Vukusic [00:03:48] Yes, it is the same thing that has been translated into several languages and applies to different jurisdictions. There are even on a credit page that you can even find ice caps, which as India says, let`s use them for companies based in India, for the startup base in India. Even in Chile, there is the Academy, an organization founded by local venture capital firms, and they have their own version of the secure agreement in Spanish. But what it is, they usually don`t respect what the vault is, and they usually just use that they just use the name, they say. I mean, guys, you Americans are great with acronyms.
You have the safe as you have the keys. How, keep it safe. You make the boss believe that you manage it well and you are great. How would you like this marketing to look like documents, wouldn`t you? And that`s where demolition usually begins. For example, if you get something, a document called a safe, but then you start checking it and it`s not so safe. I mean, for example, as with some lawyers, investors tend to design convertible bonds, and they give them the name, let`s say, you know, because it sounds chic and marketable. But they are very different from the Y combiners, like when I prepared this because I only did my job for example, I did it and I came across a document that is actually easier to understand the future equity of the company. But it had nothing to do with Y Combinator. Things like, for example, these Estonian companies had a maturity date and say that these are not debt securities so large that they do not happen to date. So that`s something that for us, like international lawyers, can find documents titled Say It or like Tableau every time you browse Law Insider. It`s something, but they`re not who they say they are.
But fortunately, there are also a lot of good documents, and there are states that are really websites and not just marketing words for you, which are your family, friends, and fundraiser at an early stage. That is the case. I shouldn`t say it falls. We say fans who say thick, family, friends and believing fans. In recent years, Silicon Valley`s standard financing instrument for early-stage startups has been the convertible bond. The standard instrument is still the change note today. However, as is always the case in Silicon Valley, it is silent. Enter the right phase: the simple agreement for future actions (SAFE for short) designed by Y Combinator`s Legal Dream team. With the SAFE post-money agreement, the investor and the company agree on a post-money valuation cap. Post-monetary valuation simply means the sum of the pre-monetary valuation plus any newly raised funds or assets.
Investors like this deal because they can tie up the percentage of the business they will own when the triggering event occurs. Post-Money-SAFE is clear, simple and more investor-friendly. This agreement does not dilute the investor`s share. Matias Vukusic [00:02:52] Yes, I am a lawyer here in Chile. I deal with startups and in the venture capital industry and secure agreement or what is usually called a secure agreement. The different versions of it are probably one of the most commonly used investment documents for startups in the start-up phase. Although the company gets its money faster, by using a SAFE deal after the money, founders may experience more dilution than with other types of fundraising agreements such as convertible bonds or Keep It Simple Security deals. The SAFE agreement is only about six pages long and can be implemented quickly. This is a significant advantage over traditional legal documents, which span dozens of pages and can take months. Although there are now several versions of the SAFE agreement, it is the most commonly used document by start-ups when raising capital. .
