Startup Fundraising with SAFEs: Avoiding Pitfalls & Risks
Details
Overview
SAFEs are the most common way to raise startup funds. But SAFEs have problems. We'll cover how to avoid them.
Many startups use a Simple Agreement for Future Equity (SAFE) to raise funds. Founders love the speed, simplicity, and ubiquity of SAFEs.
We've discussed in other events the hidden problems of SAFEs. In this event, Benjamin Novak, angel investor and partner at the law firm Morgan Lewis will cover other key pitfalls such as:
- What happens if the startup is acquired before the SAFE converts
- Challenges with "high resolution fundraising" (where you have multiple raises with small increases in valuation)
- Modification of SAFE terms and side letters
- Fiduciary responsibilities and downstream litigation issues
- Problems when oversimplifying fundraising data published by Carta
Because of these and other problems many sophisticated angel investors refuse to do deals using a SAFE. This is part of the reason why the Angel Capital Association (ACA) recently released a model convertible note template.
Founder and investors should join this dynamic and very relevant fireside chat to learn unseen factors when using SAFEs to raise funds for your startup. You'll get a chance to ask clarifying questions regarding subtle, but critical legal considerations when using a SAFE.
Fundable Startups provides coaching, training, and tools that helps founders build healthy, fundable companies. As a published author and a CEO, CTO or Tech VP of 5 startups with 3 exits, Sam Wong leads Fundable Startups in creating premium, deep-dive, visual training and tools to help founders with great execution.
Sam is also a member of Band of Angels, the first high-tech angel investment group in the USA. Since its inception in 1994, the Band has funded 400+ companies with 97 profitable M&A exits and 17 IPOs.
Benjamin David Novak is an active angel investor in early stage technology companies based on the East Coast of the United States. In addition to being an angel investor, Ben is a partner and venture capital lawyer with Morgan Lewis where he represents technology and life science companies, angel investors, venture capital funds, and private equity firms. He is an active member of the venture community, serving on numerous advisory boards and regularly speaking at tech events, judging venture conferences, and lecturing on technology, entrepreneurship, and investing at colleges and universities. Most importantly, Ben is a loving and proud husband and father.