To complicate matters a little, a SAFE will sometimes have a discount. Since the SAFE will be in front of each investor later, the SAFE investor may want the SAFE to be converted into equity into a discount on the subsequent financing cycle. Discounts are usually between 10% and 30%. As an illustration, I`ve modeled what 50% off will look like. Instead of buying shares for $1.00, the safe bearer receives shares for $0.50. Here`s an example: Another new feature of the safe refers to a «pro rata» right. The original safe required the company to allow holders of safes to participate in the financing round after the financing round in which the safe was converted (for example. B if the safe is converted into series group preferred actuators, a secure holder – now holder of a Series A preferred share subseries – is allowed to acquire a proportionate portion of the Series B preferred share). While this concept is consistent with the original concept of safe, it made no sense in a world where safes were becoming independent funding cycles. Thus, the «old» pro-rata right is removed from the new safe, but we have a new model letter (optional) that offers the investor a proportional right in the preferential financing of Series A on the basis of the converted safe property of the investor, which is now much more transparent.
Whether a start-up and an investor enter the letter with a safe will now be a choice that the parties will choose, and this may depend on a large number of factors. Factors to consider can (among other things) the amount of the safe purchase and the amount of future dilution that proportional duty can cause to the founders – an amount that can now be predicted with much greater accuracy if post-money safes are used. The new safe does not change two fundamental characteristics that we believe are important for start-ups: with pro-rata or equity rights, investors can invest additional funds to maintain their ownership in equity financing after the financing that initially converted SAFE into equity. If the investor exercises pro-rata rights, he pays the new price of the round and not the price he paid during the first safe transformation.