Ycombinator Safe Agreement

Whether you are using the vault for the first time or are already familiar with vaults, we recommend that you read our Secure User`s Guide (which replaces the original vault primer). The Safe User`s Guide explains how to convert the vault, with sample calculations as well as other details about the proportional secondary letter, explanations of other technical changes we have made to the new vault (for example. B, language for tax treatment) and suggestions for best use. All right. So now we understand safes and how they come together. We will talk about dilution and understand how your capitalization tables work. All right. So we`re going to go through that process. So we`re going to start our business, which Carolyn talked about from the beginning of the startup school course, so hopefully it won`t be anything new for you. Next, we`re going to talk about what happens when you raise money on SAFE in some post-money SAFE, and then we`re going to talk about what happens when you hire people and start spending equity for employees.

And then the company will make a price tour. And then what happens to the capitalization table? And now I`m going to warn you. This starts to get into the math part of the whole thing, so turn on your brain and keep focusing. All right. So, integration. So say it`s a very simple company, there are two founders, and they share their shares equally between the two. So, in this example, each founder owns 4.625 million shares. Thus, a total of 9.25 million shares are issued and each founder holds 50%. It`s pretty simple, isn`t it? And in order for them to own these shares, the founders did the paperwork, they granted these shares through a limited share purchase agreement, and there is a conference on these shares, as discussed with Carolyn earlier in the price. All right. So the next thing that`s going to happen is for this company to raise money on a SAFE post-money, and they`ve collected from two investors.

So the first investor arrives quite early, putting $200,000 at a valuation cap of $4 million. And then, a little later, Investor B arrives, puts $800,000 at a post-money valuation cap of $8 million. So, if you remember our formulas, the property that investor A has at this point is the amount of money he has put divided by the valuation cap after the money that gives him 5% of the company. The same goes for investor B, 800,000 out of 8 million, which gives them 10% of the company. In total, the founders sold 15% of the company at that time. So even if it doesn`t change the actual capitalization chart because these are not shares at the moment, it`s just a SAFE, it`s just a promise to give shares in the future, the founders should know at this point that they have sold 15% of the company. .