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Simple Agreement for Future Equity
I need a Simple Agreement for Future Equity (SAFE) for an early-stage investment in a startup, with a valuation cap and no discount, to be used for a seed round with Indian investors, ensuring compliance with local regulations and a clear conversion mechanism upon a qualified financing event.
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 works like a simplified convertible note but without debt or maturity dates, making it popular among Indian angel investors and early-stage ventures.
Under Indian company law, SAFEs convert to equity when specific triggers occur, typically during qualified funding rounds or company sales. This gives founders flexibility to grow without complex negotiations or immediate share dilution, while investors get the potential upside of early entry prices plus special rights during conversion.
When should you use a Simple Agreement for Future Equity?
Use a Simple Agreement for Future Equity when your startup needs quick capital but isn't ready for a formal valuation. This tool works especially well for early-stage Indian companies raising funds between ₹10-50 lakhs from angel investors or family offices who understand startup risks.
The SAFE format makes perfect sense during your first fundraising round or bridge financing, particularly when traditional venture capital seems premature. It saves significant legal costs compared to priced rounds, and lets founders maintain control while avoiding immediate share dilution. Just ensure your investors grasp that conversion terms follow Indian securities regulations.
What are the different types of Simple Agreement for Future Equity?
- Safe Equity Agreement: Standard version with valuation cap and discount rate, ideal for tech startups seeking seed funding under ₹25 lakhs
- Simple Equity Investment Agreement: More structured format with detailed conversion mechanics and investor rights, suited for larger rounds up to ₹2 crore with institutional investors
Who should typically use a Simple Agreement for Future Equity?
- Startup Founders: Create and propose SAFEs to raise quick capital without immediate equity dilution or complex negotiations
- Angel Investors: Use these agreements to invest early in promising startups while securing future equity rights
- Corporate Lawyers: Draft and customize SAFE terms to comply with Indian securities laws and protect both parties' interests
- Company Secretaries: Maintain proper documentation and ensure regulatory compliance with SEBI guidelines
- Investment Platforms: Facilitate SAFE-based transactions between startups and investors, often using standardized templates
How do you write a Simple Agreement for Future Equity?
- Company Details: Gather your startup's incorporation documents, valuation details, and cap table
- Investment Terms: Define the investment amount, valuation cap, and any discount rate for future rounds
- Trigger Events: Specify which future financing events will convert the SAFE into equity
- Investor Information: Collect KYC documents and investment entity details as per SEBI guidelines
- Board Approval: Secure necessary board resolutions authorizing the SAFE issuance
- Documentation: Use our platform to generate a legally compliant SAFE template, customized for Indian regulations
What should be included in a Simple Agreement for Future Equity?
- Purchase Amount: Clearly state the investment sum and payment terms in INR
- Conversion Terms: Define equity conversion triggers, valuation cap, and discount rate
- Company Details: Include full legal name, CIN, registered office, and authorized representatives
- Investor Rights: Specify information rights, pro-rata rights, and MFN provisions
- Governing Law: State applicable Indian laws and jurisdiction for dispute resolution
- Termination Clauses: Detail conditions for agreement termination or dissolution
- Regulatory Compliance: Include SEBI-mandated disclosures and statutory declarations
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 a standard Equity Agreement in several key aspects. While both deal with company ownership, their approach and timing vary considerably under Indian corporate law.
- Investment Structure: SAFEs are promises of future equity without immediate share issuance, while Equity Agreements transfer ownership immediately
- Valuation Requirements: SAFEs don't need current company valuation, making them ideal for early-stage startups, whereas Equity Agreements require defined share prices
- Legal Complexity: SAFEs use simpler documentation and fewer compliance requirements under Companies Act, 2013
- Shareholder Rights: Equity Agreements grant immediate voting and dividend rights; SAFE holders must wait until conversion to receive these privileges
- Exit Flexibility: SAFEs offer more flexible terms for both parties until the triggering event occurs
Find the exact document you need
Safe Equity Agreement
An Indian law-compliant Simple Agreement for Future Equity (SAFE) for early-stage startup investment, providing rights to future equity conversion.
Simple Equity Investment Agreement
An Indian law-governed agreement establishing terms for equity investment in a company, including share allocation, investor rights, and compliance requirements.
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