������Ƶ

A Simple Agreement for Future Equity (SAFE) gives investors the right to receive company shares in the future, typically when the startup raises a priced funding round or gets acquired. It's become a popular alternative to convertible notes among Canadian tech startups because it's simpler and doesn't include interest rates or maturity dates.

SAFEs help early-stage companies raise capital quickly without setting a firm valuation right away. When a triggering event occurs, like a Series A round, the SAFE converts to equity at either a discount or a pre-set valuation cap. Under Canadian securities laws, SAFEs qualify as securities and must comply with applicable prospectus exemptions, usually under National Instrument 45-106.

Use a Simple Agreement for Future Equity when your startup needs quick access to capital but isn't ready to set a firm company valuation. It's particularly valuable for early-stage Canadian companies raising pre-seed or seed funding from angel investors and accelerators, especially when traditional equity rounds would be too expensive or time-consuming.

SAFEs work best when you expect to raise a larger priced round within 12-24 months. Many Canadian founders choose SAFEs during initial fundraising because they're faster to negotiate than convertible notes and don't burden the company with debt obligations. Just ensure your investors understand the specific conversion terms and that you're complying with provincial securities regulations.

• Valuation Cap SAFE: Sets a maximum price for converting the investment into equity, protecting investors if the company value rises sharply
• Discount SAFE: Offers investors a percentage discount on the share price during the next funding round
• MFN (Most Favored Nation) SAFE: Automatically gives investors the best terms offered to future SAFE holders
• Cap and Discount SAFE: Combines both a valuation cap and discount rate, giving investors the more favorable conversion term
• Post-Money SAFE: Calculates the conversion based on post-money valuation, providing clearer ownership outcomes for Canadian investors

• Startup Founders: Use SAFEs to raise early-stage capital without immediately diluting equity or taking on debt obligations
• Angel Investors: Provide seed funding through SAFEs to get early access to promising startups with potential for high returns
• Accelerators: Often accept SAFEs as their standard investment vehicle when funding cohort companies
• Corporate Lawyers: Draft and review SAFE agreements to ensure compliance with Canadian securities regulations
• Securities Regulators: Monitor SAFE offerings to ensure they meet prospectus exemption requirements under NI 45-106

• Investment Terms: Decide on valuation cap, discount rate, or both for the SAFE conversion
• Company Details: Gather corporate information, shareholder structure, and current capitalization table
• Investor Information: Collect full legal names, addresses, and investment amounts from all participating investors
• Triggering Events: Define specific events that will trigger conversion, like equity financing or acquisition
• Regulatory Compliance: Confirm which prospectus exemption under NI 45-106 applies to your SAFE offering
• Documentation: Use our platform to generate a legally-sound SAFE agreement that includes all required elements

• Purchase Amount: Clear statement of investment sum and payment terms
• Conversion Terms: Detailed mechanics for converting the SAFE into equity, including valuation cap or discount rate
• Triggering Events: Specific conditions that prompt conversion, like equity financing or company sale
• Company Representations: Declarations about corporate status and authority to issue securities
• Investor Rights: Pro-rata rights, information rights, and any special provisions
• Governing Law: Explicit statement choosing Canadian provincial jurisdiction
• Termination Provisions: Conditions for ending the agreement and handling unconverted SAFEs

A Simple Agreement for Future Equity (SAFE) differs significantly from an Equity Agreement. While both involve company ownership, they serve distinct purposes in Canadian business law.

• Timing of Ownership: SAFEs promise future equity based on specific triggers, while Equity Agreements transfer ownership immediately
• Valuation Requirements: SAFEs don't need a current company valuation, making them ideal for early-stage startups. Equity Agreements require an agreed-upon valuation
• Legal Structure: SAFEs are investment instruments that convert to shares later, while Equity Agreements establish direct shareholder rights and obligations immediately
• Documentation Complexity: SAFEs typically require less paperwork and negotiation than full Equity Agreements, which need detailed shareholder provisions
• Regulatory Treatment: Under Canadian securities laws, SAFEs are considered securities requiring exemption filings, while Equity Agreements involve direct share issuance compliance