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Simple Agreement for Future Equity
I need a Simple Agreement for Future Equity for an early-stage startup investment, where the investor provides a cash investment in exchange for the right to receive equity at a future date, with a valuation cap and no discount rate, and the agreement should comply with UAE regulations.
What is a Simple Agreement for Future Equity?
A Simple Agreement for Future Equity (SAFE) lets startups raise quick funding by promising investors future shares instead of immediate equity. It's gaining popularity in the UAE's tech hubs like Dubai and Abu Dhabi as a more flexible alternative to traditional convertible notes.
Under UAE commercial law, SAFEs give investors the right to convert their investment into company shares during future funding rounds or specific trigger events. The agreement typically specifies a valuation cap and discount rate, protecting both the startup's current ownership and the investor's future stake. Many UAE accelerators and early-stage investors now prefer SAFEs for their simplicity and lower legal costs.
When should you use a Simple Agreement for Future Equity?
A Simple Agreement for Future Equity works best when your UAE startup needs quick capital without the complexity of immediate equity negotiations. It's particularly valuable during early-stage fundraising rounds when your company's valuation remains uncertain, or when you need to close deals with multiple investors rapidly.
This agreement makes sense for UAE tech startups aiming to raise between AED 100,000 and AED 2 million from angel investors or local accelerator programs. It offers faster execution than traditional investment methods, especially when your company needs bridge funding before a larger equity round. Many Dubai-based founders use SAFEs to maintain control while securing essential growth capital.
What are the different types of Simple Agreement for Future Equity?
- Valuation Cap SAFE: Sets a maximum company valuation for converting investment to equity, popular among Dubai tech startups
- Discount SAFE: Offers investors shares at a reduced price compared to later investors, common in UAE seed rounds
- MFN (Most Favored Nation) SAFE: Automatically gives investors the best terms offered to other SAFE holders
- Post-Money SAFE: Calculates ownership based on the company's post-money valuation, providing clearer equity outcomes
- Basic SAFE: A straightforward version without caps or discounts, suited for quick bridge funding in UAE markets
Who should typically use a Simple Agreement for Future Equity?
- Startup Founders: Tech entrepreneurs and company owners in UAE innovation hubs who need flexible funding without immediate equity dilution
- Angel Investors: High-net-worth individuals and family offices in Dubai and Abu Dhabi seeking early-stage investment opportunities
- Legal Counsel: UAE-licensed attorneys who draft and review SAFE agreements to ensure compliance with local commercial laws
- Accelerators: Innovation programs and startup incubators offering standardized SAFE investments to portfolio companies
- Corporate Finance Advisors: Financial experts who structure terms and valuations within UAE regulatory frameworks
How do you write a Simple Agreement for Future Equity?
- Company Details: Gather current shareholding structure, incorporation documents, and UAE trade license information
- Investment Terms: Define the investment amount, valuation cap, and any discount rates aligned with UAE market standards
- Trigger Events: Specify conditions for equity conversion, including future funding rounds or exit scenarios
- Investor Information: Collect investor KYC documents and verify compliance with UAE foreign investment regulations
- Board Approval: Secure necessary corporate authorizations as per your company's articles of association
- Documentation: Use our platform to generate a UAE-compliant SAFE agreement with all required elements included
What should be included in a Simple Agreement for Future Equity?
- Investment Terms: Clear statement of investment amount, valuation cap, and discount rate in UAE dirhams
- Conversion Rights: Detailed conditions triggering equity conversion, including qualifying financing rounds
- Company Information: Full legal name, trade license number, and registered UAE office address
- Investor Rights: Pro-rata rights, information rights, and any special preferences under UAE law
- Exit Provisions: Treatment of the investment during company sale, IPO, or dissolution
- Governing Law: Explicit reference to UAE Commercial Companies Law and relevant DIFC/ADGM regulations
- Dispute Resolution: Specified UAE jurisdiction and preferred arbitration venue
What's the difference between a Simple Agreement for Future Equity and an Equity Agreement?
A Simple Agreement for Future Equity (SAFE) differs significantly from an Equity Agreement in several key aspects. While both deal with company ownership, they serve distinct purposes in UAE's startup ecosystem.
- Timing of Ownership: SAFEs defer equity transfer until a future event, while Equity Agreements create immediate shareholding rights
- Valuation Requirements: SAFEs can be issued without setting a current company valuation, making them ideal for early-stage startups in Dubai's tech sector
- Legal Complexity: SAFEs typically require less documentation and fewer shareholder approvals under UAE law
- Investor Rights: Equity Agreements grant immediate voting and dividend rights, while SAFEs only convert to these rights upon triggering events
- Regulatory Oversight: Equity Agreements face stricter UAE Commercial Companies Law requirements regarding shareholder registration and corporate governance
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