Safe Pro Rata Rights Agreement

Fixed base. It is even rarer for investors who receive fixed amounts on a pro rata basis to retain the right to continue investing an agreed amount decoupled from the investment amount. For example, if an investor who has invested $1 million in a seed negotiates proportional fees of up to $500,000, they can invest up to $500,000 in each new funding round. Whether you are using the safe for the first time or already have safes, we advise you to read our Safe User Guide (a substitute for the original Safe Primer). The Safe User Guide explains how the vault is converted, with sample calculations as well as other details about the proportional secondary letter, explanations of other technical changes to the new vault (e.g.B. Language for tax treatment) and suggestions for the best use. Proportional fees can be calculated on the basis of a percentage, one dollar to one dollar or a fixed sum. A safe Pro Rata Rights Agreement is a letter by which a company grants proportional rights to a SAFE investor. This is an important technical feature that deserves a deep dive. Suppose SAFE converts to Serie A. Under the former SAFE, SAFE holders – now holders of Series A preferred shares – were diluted by other SAFE and Series A holders, but were then allowed to acquire a proportionate portion of series B-Round to retain ownership. If the investor signs the letter on a pro rata basis after the new SAFE, he will have the right to retain his Series A property. In other words, an investor who bets $2 million on $10 million according to SAFE can effectively retain that 20% of the property beyond Series A and possibly beyond.

First of all, you need to negotiate with everyone you`ve given proportional rights to in previous deals, and if you`re okay, early investors with proportional rights are encouraged to want to own more of your business (they also have incentives to close the deal so you can continue to grow). . . .