SAFER INSTRUMENT

A structure designed for funding real businesses

Traditional venture financing forces a choice: founders give up control for capital, or investors wait a decade for binary exit outcomes. The Safer instrument eliminates this tradeoff.

The Safer (Simple Agreement for Future Equity with Repurchase) combines equity participation with revenue-linked returns. Investors receive revenue-based payments tied to company performance while retaining upside. Founders preserve control and can repurchase equity as their business grows. Both parties benefit when the company builds sustainable value.

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How the Safer instrument works

Key terminology

Purchase Amount: The initial capital the investor provides. Typical ranges: $250K for pre-seed, $500K–$1.5M for seed-stage companies.

Honeymoon Period: A window post-investment during which no repurchase payments are made. Typically 12–18 months. Gives the company runway to deploy capital before revenue obligations begin.

Revenue Percentage: The percentage of top-line gross revenue used to make quarterly repurchase payments after the honeymoon period ends. Typically 1%–10%, negotiated based on company economics and growth stage.

Repurchase Percentage: The portion of the original investment the investor agrees to sell back to the company through revenue payments. Typically 50%-95%. The remaining equity converts for full upside participation.

Target Return: The total return amount the investor aims to receive through repurchase payments. Typically 2x–3.25x the original investment. Once achieved, repurchase obligations end.

Initial investment

Investor provides the Purchase Amount. Company and investor enter the Safer agreement with negotiated terms.

Development phase

During the Honeymoon Period, no repurchase payments are made. The company deploys capital without payment obligations.

Revenue participation

Once the Honeymoon Period ends, repurchase payments begin. Payments continue until cumulative distributions reach the Target Return.

Termination

The Safer agreement ends when the investor receives full payment from either a Liquidity Event or Dissolution Event.

Liquidity event

Upon exit, the investor receives the greater of: (a) the Cash-Out Amount, or (b) the Conversion Amount based on equity ownership at the valuation cap.

Dissolution event

If the company winds down without a liquidity event, the investor receives the Cash-Out Amount, ensuring partial return of capital.

Company control

No board seats required. No voting rights transferred. Governance remains with the founding team.

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Equity repurchase

Revenue payments reduce investor equity over time. As your business generates cash, you recapture ownership.

Patient capital timeline

No artificial pressure to exit. The Safer accommodates the development timelines deep tech requires.

Transparent terms

All parameters negotiated upfront. No convertible note surprises. No complex waterfall provisions.

Earlier liquidity

Quarterly distributions begin after the Honeymoon Period and companies generate revenue.

Equity upside

Remaining equity converts at the original cap. The Safer doesn't cap upside, it adds a floor.

Structural alignment

Revenue-based returns mean investors benefit when companies build sustainable operations.

Downside protection

In dissolution scenarios, investors receive remaining Cash-Out Amount before equity distribution.

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Legal foundation

The Simple Agreement for Future Equity with Repurchase (Safer) was developed in collaboration with Polsinelli, a leading national law firm with deep expertise in venture financing and securities law. The legal structure represents over a year of development. We solicited feedback from dozens of entrepreneurs, investors, and attorneys. The final form addresses edge cases, regulatory requirements, and practical implementation concerns that emerge in actual deployment.

Special thanks to Christopher Simpson and the corporate and securities team at Polsinelli for their contribution to this work.

Download the Safer form

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 accountant and tax advisor in your jurisdiction before using these materials.

Accounting and tax treatment

The Safer's hybrid structure requires clear guidance on accounting treatment and tax implications. We partnered with Armanino, a top-25 accounting firm, to produce comprehensive documentation for CFOs, accounting teams, and tax advisors.

The whitepaper covers recognition timing, revenue percentage treatment, conversion mechanics, and reporting requirements under current accounting standards. This guidance enables companies to adopt the Safer without creating audit complications or tax uncertainty.

Get the Safer accounting whitepaper

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