Introducing
the Safer

A better startup financing model for founders and their first believer investors. The Safer is open source and free for everyone to use.

Download the Safer Agreement

What is the Safer?

Safer stands for Simple Agreement for Future Equity with Repurchase.

It's a new financial instrument designed to give investors the right to future shares of a company and periodic returns based on the company’s revenue.

Safer strikes a balance, ensuring early investors see structured returns, while founders and teams retain more of their equity.

How the Safer Works

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

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Key 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 1-10%).
  • 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 makes an investment of the "Purchase Amount" in the company in exchange for entering the Safer agreement.
  2. The Waiting Phase: For the duration of 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 starts making quarterly Repurchase Payments to the investor. These payments are made quarterly and based on a set Revenue Percentage of the company's top-line revenue. If the company has no revenue for a quarter, no payment is made. This continues until the total repurchase payments equal the Target Return.
  4. Liquidity Event: If the company goes public or gets bought out, 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 will receive the Cash-Out Amount, ensuring some level of return on his investment.
  6. Termination: The Safer agreement automatically ends once the investor is paid from either a Liquidity or Dissolution Event.

Modeling the Safer

Navigating the  intricacies of new financial structures can be complex. We created the Safer simulator below to provide an easy visual representation of how Safer investments evolve over time. The model scenario is purely illustrative and shows a hypothetical Safer investment over an 84 month timeline.

Here's a guide on how to use the Simulator tool:

  1. Purchase Amount: Set the initial investment amount of the Safer. This value represents the starting point of your Safer journey.
  2. Revenue Percentage: Adjust the percentage of the company's total revenue that will be dedicated to Safer repurchase payments quarterly. This will influence the speed at which the Safer amount decreases.
  3. Target Return Percentage: Define the investor's desired return on the Safer investment. This will impact the total amount required to repurchase the Safer.
  4. Revenue: Set the projected cumulative revenue over an 84-month period. This will help simulate the company's growth trajectory and its impact on repurchase payments.
  5. Repurchase Percentage: Decide on the percentage of the initial Safer investment that can be repurchased by the company. This will directly affect the Safer Amount line on the graph.
  6. Valuation Cap: Determine the valuation cap for the Safer agreement. This will be used to calculate the conversion of any remaining Safer amount at the end of the period and affects the amount paid to the investor in an exit event.

Safer Simulator

250,000
5%
100%
50%
2500000
20000000
2000000

Why Use a Safer?

Safer offers unique benefits to both founders and early-stage investors.

For Founders

Starting a new business is no small feat. You're innovating, creating, and daring to dream big. We believe your financing model should support and fuel your ambition, not stifle it.

Protect Your Vision
‍Safer allows you to maintain a strong degree of control over your startup, ensuring your vision remains undiluted in the crucial early stages.

‍Financial Flexibility
With repayments linked to actual revenues, you won't face undue pressure during lean times, allowing for natural business growth.

‍Retain More Equity
‍Traditional financing often requires giving away significant equity early on. Safer's structure means you  keep more of your company for longer.
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‍Build Stronger Investor Relationships
Safer fosters a collaborative approach, aligning your success directly with your investors, encouraging mutual support.

‍Clear Commitments
The Safer agreement outlines clear financial commitments, allowing for transparent and predictable financial planning.

For Investors

Navigating the world of early-stage startup investment is daunting. The traditional models often expose you to significant risk and often lead to substantial dilution in later funding rounds. But what if there was a better way? Enter Safer - a more equitable approach to startup financing designed with early-stage investors in mind.

Structured Returns
Enjoy a predictable return stream based on startup revenues post the honeymoon period, ensuring a steady ROI as the company grows.

‍Equity Upside
Safer provides the potential for equity conversion during liquidity events, letting you participate in significant upside.

‍Reduced Dilution Risk
By aligning returns with revenues, Safer minimizes the risk of substantial dilution in later funding rounds, safeguarding your initial investment.

More Opportunities
‍Safer allows investors to move beyond the restrictive 'unicorn hunting' model. By supporting a broader range of startups, investors can tap into a wider spectrum of innovative and potentially rewarding ventures.
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‍Transparent Investment
With clear terms and a focus on revenue-based returns, Safer offers transparency, reducing uncertainties often associated with early-stage investments.

Get the Safer Docs

The Safer is free for everyone to download, modify, and and use under
an open source license.

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 and patience.

The final form of the Safer would not have been possible without the brilliant legal minds at Polsinelli, with special thanks to Christopher Simpson.
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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.

Download the Safer Agreement

Safer FAQs

Your answers to common questions about the Safer.

Can I use a Safer for a later stage startup company?

The Safer was designed for the earliest stages of the startup lifecycle. Technically, there is no reason a Safer cannot be used in later stage companies. However, they have more complex capital structures and many more financing options which may make the Safer less attractive for them.

Is the Safer pre-money or post-money?

The first version of the Safer is post-money. We will be releasing additional variants of the Safer in the near future.

What happens to the Safer when I raise additional funding?

Nothing happens to the Safer when you raise additional funding. Unlike a Safe, the Safer does not convert on equity financing events and remains in effect until it is terminated. The Safer terminates on a liquidity or dissolution event as specified in the agreement.

Will new investors object if I have financed with a Safer?

That is a real possibility. The Safer is a new financial instrument and is unfamiliar to investors. Furthermore, we fully expect the fact the Safer does not convert on equity financing to be objectionable to some VC funds. That is, at least until they realize the aim of the Safer investor is simply to get a return on their investment. The Safer was created based on the radical idea that founders and their earliest investors deserve a return on their investment instead of 🐃 💩.

Is the Safer agreement really free to use?

Yes, as long as you comply with the license. The Safer agreement is released under the Creative Commons Attribution-NoDerivatives 4.0 International License. Our goal is to maximize the adoption of the Safer in early stage financing. It is our gift to the startup community.

Who are you guys?

Next Wave Partners is a venture studio, venture fund, and strategy firm. We help founders and corporate innovators launch innovative products and services, faster, with less effort. Our mission is to create a better innovation model that works for everyone. You can read more about us in Our Story.

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