Why the Safer?
The Safer (Simple Agreement for Future Equity with Repurchase) is a revolutionary financing tool that addresses the structural inefficiencies of traditional venture capital, making it a must-have for investors and founders seeking sustainable growth.
Unlike conventional equity or Safe agreements, the Safer offers a built-in revenue-linked repurchase mechanism, allowing investors to achieve liquidity without depending on unpredictable exit scenarios. This innovation ensures early investors can secure venture-scale returns through predictable cash flows while enabling founders to focus on building resilient, sustainable businesses without pressure to chase unsustainable unicorn valuations.
By better aligning incentives between investors and founders, the Safer empowers a broader range of investors to support transformative startups and equips founders with the freedom to grow on their own terms.
How the Safer Works
- 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
- Initial Investment: An investor invests the "Purchase Amount" in the company in exchange for entering the Safer agreement.
- 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.
- 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.
- 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.
- 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.
- Termination: The Safer agreement automatically ends once the investor is paid from a Liquidity or Dissolution Event.
Safer Legal Template
The Safer was developed in collaboration with expert legal guidance from Polsinelli to address the structural inefficiencies of traditional venture financing. The final form of the Safer would not have been possible without the brilliant legal minds at Polsinelli, with special thanks to Christopher Simpson.
The Safer is the product of over a year of development at Next Wave Partners, during which we solicited feedback and iterated the concept with dozens of entrepreneurs, investors, and attorneys across the industry. Our sincere thanks to everyone for your feedback.
Neither Next Wave Partners nor Polsinelli are responsible for the content or results of using the Safer Agreement form or any other documents from our website. Please consult with a qualified attorney in your company's jurisdiction before using these forms.
Safer Tax and Accounting Treatment
While the Safer represents a breakthrough in venture financing, its tax treatment and accounting implications have been carefully analyzed to ensure clarity and compliance.
To provide the investment and founder community with detailed guidance, we partnered with Armanino, a leading accounting firm, to produce a comprehensive whitepaper on the taxation of the Safer. This whitepaper outlines key considerations for founders and investors, including its revenue-linked repurchase mechanism, reporting requirements, and alignment with tax regulations.
We're proud to offer this resource free to the community, empowering users to navigate the Safer with confidence and precision.
Neither Next Wave Partners nor Armanino are responsible for the content or results of using the Safer Agreement form or any other documents from our website. Please consult with a qualified attorney in your company's jurisdiction before using these forms.
