Both are convertible securities, and convert into preferred shares based on a given valuation cap and discount rate. SAFE and KISS are very similar instruments. Indeed, it’s really easy to issue these notes, the documentation often is only 1-2 pages, and access to funds is much faster vs. Equity KISS: the note doesn’t have any interest nor a maturity date (like SAFE)Īs for SAFE, KISS also convert into preferred stock based on the discount rate and valuation cap agreed on within the KISS legal documentation.īoth notes are a very attractive form of financing for early-stage startups that need to raise seed funding.Debt KISS: the note has accruing interest and a maturity date.As such, both SAFE and KISS delay the need for a valuation and expensive legal costs to issue preferred shares. Like SAFE, KISS is a convertible security: the security converts into equity ( preferred stock) at a given qualifying event. Like YCombinator with their SAFE notes, KISS aims to simplify and standardize seed funding for startups. KISS (stands for “Keep It Simple Security”) was created by 500 Startups in 2014. Here, the conversion price is the lesser of the valuation cap or discount Instead, there are 3 types of SAFE notes: Yet, a SAFE note might not have a cap and a discount. The number of shares a SAFE investor is allowed to convert its SAFE notes into is a function of a number of factors: the discount rate and/or the valuation cap, if applicable. Instead, they get a warrant: a right to convert their warrant (SAFE) into shares at the next fundraising round. Therefore, when investors invest with SAFE, they aren’t given shares yet. SAFE gives investors the right to convert their SAFE notes into shares at a future fundraising (priced) round. For more information on convertible notes for startups, read our full guide here. It has been created in 2013 by the YCombinator team as an alternative to another similar instrument: convertible notes. SAFE (short for “Simple Agreement for Future Equity”) is a financial instrument that allows investors to invest in early-stage startups. How do they compare? What is best for your startup? In this article we’ll cover: What Is SAFE? Yet, whilst they’ve been designed to make seed funding more accessible, quicker, and easier, SAFE and KISS have clear differences. Franchises: 250+ templates built specifically for franchisees, from restaurants, gyms, home services and moreĬonvertible securities have become increasingly popular for early-stage startups that need to raise seed funding to the point here YCombinator and 500 Startups both decided to create their own financial instruments: SAFE and KISS notes.īoth are an alternative to convertible notes, and standard priced equity rounds.By industry: 100+ templates for specific business models (SaaS, ecommerce, hotels, restaurants, retail stores, etc.).All our financial model templates are built and customised for specific businesses and industries.
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