Simple Agreement for Future Equity with Repurchase

The Safer allows companies to secure investments without immediately diluting ownership. As investors, it offers a structured return process and ensures we have preferential rights if the company is sold or dissolved. By melding the best aspects of debt and equity, the Safer creates a win-win financing landscape for companies and investors.‍

Critical Components of the Safer

• Purchase Amount: This is the initial amount the investor gives to the company. For example, this could be $250,000 for a pre seed startup, or $1,000,000 for a Seed startup.
• Honeymoon Period: A timeframe post-investment during which no repurchase payments are made to the investor (typically 12 to 18 months).
• Repurchase Percentage: This is the percentage of the Purchase Amount the investor is willing to sell back to the company at the predetermined price using a percentage of revenues (typically 50-95%).
• Revenue Percentage: This is the percentage of top-line (gross) revenues used to make repurchase payments to the investor after the honeymoon period is over (often between 1% and 10%).
• Target Return: This is the total return amount the investor aims to receive from their investment after all repurchase payments have been made.

Safer Investment Lifecycle

1. Initial Investment: An investor invests the "Purchase Amount" in the company in exchange for entering the Safer agreement.
2. The Waiting Phase: During the Honeymoon Period, the investor will not receive any repurchase payments. This period allows the company some breathing room to utilize the investment and focus on building.
3. Regular Returns: Once the Honeymoon Period expires, the company makes quarterly Repurchase Payments to the investor. These payments are made based on a set Revenue Percentage of the company's top-line revenue. If the company has no quarterly revenue, no payment is made. This continues until the total repurchase payments equal the Target Return.
4. Liquidity Event: If the company goes public or is sold, the investor will receive either the Cash-Out Amount or the Conversion Amount, whichever is higher.
5. Dissolution Event: If the company folds or dissolves without a liquidity event, the investor will receive the cash-out amount, ensuring some return on his/her investment.
6. Termination: The Safer agreement automatically ends once the investor is paid from a Liquidity or Dissolution Event.