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A Simple Agreement for Future Equity (SAFE) lets startups raise money from investors without immediately setting a company valuation or issuing shares. It's a popular alternative to convertible notes in Hong Kong's startup scene, offering simpler terms and less paperwork than traditional funding methods.

Under a SAFE, investors provide funding now in exchange for the right to get shares later, typically during the next equity financing round. This approach gives founders quick access to capital while protecting both parties under Hong Kong securities laws. The agreement automatically converts to equity when specific events occur, like a qualified funding round or company sale.

Consider a Simple Agreement for Future Equity when your Hong Kong startup needs quick capital but can't easily determine its current valuation. This works especially well for early-stage companies raising their first round of funding, where traditional equity deals might be too complex or expensive.

SAFEs make the most sense during bridge rounds between major funding events, particularly when you need to move quickly and keep legal costs low. They're ideal when investors are willing to back your vision but need the flexibility to determine share prices later. Just ensure your company structure allows for future equity conversion under Hong Kong's Companies Ordinance.

• Simple Agreement for Future Equity documents in Hong Kong typically come in three main variations: valuation cap only, discount only, or most commonly, a combination of both. Cap SAFEs set a maximum company value for conversion, discount SAFEs offer shares at a reduced future price, while dual-feature SAFEs give investors the better deal between the two options.
• Some SAFEs include pro-rata rights, letting investors maintain their ownership percentage in future rounds. Others add specific trigger events for conversion beyond standard funding rounds, like IPOs or acquisitions.
• Most-favored nation (MFN) SAFEs automatically update their terms if better ones are offered to later investors.

• Startup Founders: Sign SAFEs to secure early-stage funding without immediately diluting their equity or setting a firm valuation. They maintain control while getting quick access to capital.
• Angel Investors: Provide funding through SAFEs to get early access to promising Hong Kong startups, often securing better terms than later investors.
• Corporate Lawyers: Draft and review SAFE agreements to ensure compliance with Hong Kong securities laws and protect both parties' interests.
• Company Secretaries: Maintain records of SAFEs and handle conversion documentation when trigger events occur.

• Company Details: Gather your Hong Kong company registration number, incorporation documents, and current capitalization table.
• Investment Terms: Decide on the investment amount, valuation cap, and any discount rate you'll offer investors.
• Conversion Triggers: Define specific events that will convert the SAFE into equity, like qualified financing rounds or exits.
• Pro-rata Rights: Determine if investors will have rights to participate in future funding rounds.
• Documentation: Use our platform to generate a legally compliant SAFE agreement, ensuring all required elements meet Hong Kong securities regulations.

• Investment Terms: Clear statement of funding amount, valuation cap, and any discount rate for future equity conversion.
• Conversion Mechanics: Detailed triggers for converting to equity, including qualified financing thresholds and calculation methods.
• Company Information: Full legal name, registration number, and authorized representatives under Hong Kong law.
• Rights and Restrictions: Investor voting rights, transfer limitations, and pro-rata participation rights in future rounds.
• Exit Provisions: Treatment of the SAFE in case of dissolution, merger, or IPO.
• Governing Law: Explicit statement placing the agreement under Hong Kong jurisdiction.

A Simple Agreement for Future Equity (SAFE) differs significantly from an Equity Agreement in several key ways, though both deal with company ownership. Here are the main distinctions:

• Timing of Share Issuance: SAFEs delay share issuance until a future event, while Equity Agreements transfer shares immediately upon signing.
• Valuation Requirements: SAFEs don't need a current company valuation, making them ideal for early-stage startups. Equity Agreements require a defined company valuation at signing.
• Investor Rights: SAFE holders typically have no voting or management rights until conversion, whereas Equity Agreement shareholders receive immediate shareholder rights.
• Legal Complexity: SAFEs are usually shorter and simpler under Hong Kong law, with fewer requirements for immediate corporate governance changes.
• Cost and Speed: SAFEs can be executed more quickly and cheaply, without extensive due diligence or shareholder approvals needed for direct equity transfers.