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A priced round will convert the SAFEs. In addition, because you're the largest investor, you do have some leverage. Usually, the best thing to do is to hash this out with the founding team 1st. For example, you can get them to agree to d...

A priced round will convert the SAFEs. In addition, because you're the largest investor, you do have some leverage. Usually, the best thing to do is to hash this out with the founding team 1st. For example, you can get them to agree to do a priced round to convert the SAFEs and to introduce a board as well during this process. 

This is not a good approach and will cause 409a valuation issues for the founder. It's also incredibly difficult for them to explain this to future investors. Every investor in this round should come in on the same terms. Then, after the...

This is not a good approach and will cause 409a valuation issues for the founder. It's also incredibly difficult for them to explain this to future investors. Every investor in this round should come in on the same terms. Then, after they close, they can raise the cap for the next SAFE as they can justify this with more traction.

Generally speaking, an Advanced Subscription Agreement (commonly known as an ASA and designed for use in the United Kingdom), is conceptually similar to a SAFE (originally designed for use within the United States).  However, there are ...

Generally speaking, an Advanced Subscription Agreement (commonly known as an ASA and designed for use in the United Kingdom), is conceptually similar to a SAFE (originally designed for use within the United States).  However, there are a few fundamental differences to be aware of, though these may vary depending on how the ASA is drafted - here are a few notable ones: • The ASA was designed to be eligible for certain tax advantages under the Enterprise Investment Scheme (EIS and the Seed Enterprise Investment Schemes (SEIS); • The ASA has a "Long Stop" term, essentially a date before which a conversion event (as defined in the ASA) must happen - otherwise the ASA automatically converts to equity on a pre-agreed price (this is not a concept in standard SAFES); • In order to qualify for the aforementioned tax advantages, it appears that the Long Stop date must be no later than 6 months after the issuance of the ASA; • 6 months may not be sufficient time for a startup to reach a qualifying conversion event (i.e. a preferred equity financing) - so this is something to carefully consider. *Please consult UK tax advice and/or counsel should you have questions about a specific set of circumstances.   

Question: With respect to financing documents, what does an early-stage VC need to do at the time of a an Equity Financing (aka Preferred Stock Financing), if said VC invested earlier in a typical SAFE note? A standard, unaltered Y Com...

Question: With respect to financing documents, what does an early-stage VC need to do at the time of a an Equity Financing (aka Preferred Stock Financing), if said VC invested earlier in a typical SAFE note? A standard, unaltered Y Combinator SAFE in 2023 contains language such as the following (please review variations published by Y Combinator for exact phrasing): "In connection with the automatic conversion of this Safe into shares of Standard Preferred Stock or Safe Preferred Stock, the Investor will execute and deliver to the Company all of the transaction documents related to the Equity Financing; provided, that such documents (i) are the same documents to be entered into with the purchasers of Standard Preferred Stock, with appropriate variations for the Safe Preferred Stock if applicable, and (ii) have customary exceptions to any drag-along applicable to the Investor, including (without limitation) limited representations, warranties, liability and indemnification obligations for the Investor." Answer: *Typically, during an Equity Financing, the Company (the portfolio company), will retain a law firm, which will be responsible for coordinating/distributing documents and requesting signatures as needed. **SAFE investors typically sign a subset of the Equity Financing documents.  Generally a VC in similar circumstances will need to: • Review the Preferred Stock Purchase Agreement and accompanying documents (with the assistance of its own counsel, which is usually recommended) to ensure its SAFE is converting correctly and as intended; • Sign the final financing documents (or subset thereof) as distributed by the portfolio company's law firm; • Receive and retain a final, fully executed set of closing documents for the Preferred Stock Financing.