Safe: Valuation Cap, No Discount (Canada) by Y Combinator
The Y Combinator SAFE: Valuation Cap, No Discount (Canada) governs how investor funds convert into equity based on a pre-set post-money valuation cap, without applying a discount. It ensures that the investor receives shares at a price reflecting the valuation cap if a future financing, liquidity event, or dissolution occurs. This SAFE is part of Y Combinator’s library of open, lawyer-vetted standard financing documents adapted for Canadian securities law.
SAFE (Simple Agreement for Future Equity)
THIS INSTRUMENT AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES OF AMERICA SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED IN THIS SAFE AND UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) THE DATE OF ISSUANCE OF THIS SECURITY OR (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
THIS CERTIFIES THAT in exchange for the payment by [Investor Name] (the “Investor”) of [Purchase Amount] (the “Purchase Amount”) on or about [Effective Date], a corporation organized under the laws of [Company Jurisdiction] (the “Company”), hereby issues to the Investor the right to certain of the Company’s Capital Shares, subject to the terms described below.
This Safe is one of the forms available at http://ycombinator.com/documents and the Company and the Investor agree that neither one has modified the form, except to fill in blanks and bracketed terms.
The “Post-Money Valuation Cap” is [Post-Money Valuation Cap]. See Section 2 for certain additional defined terms.
Events
(a) Equity Financing. If there is an Equity Financing before the termination of this Safe, on the initial closing of such Equity Financing, this Safe will automatically convert into the greater of: (1) the number of Standard Preferred Shares equal to the Purchase Amount divided by the lowest price per share of the Standard Preferred Shares; or (2) the number of Safe Preferred Shares equal to the Purchase Amount divided by the Safe Price.
In connection with the automatic conversion of this Safe into Standard Preferred Shares or Safe Preferred Shares, the Investor will execute and deliver to the Company all of the transaction documents related to the Equity Financing; provided, that such documents (i) are the same documents to be entered into with the purchasers of Standard Preferred Shares, with appropriate variations for the Safe Preferred Shares if applicable; and (ii) have customary exceptions to any drag-along applicable to the Investor, including (without limitation) limited representations, warranties, liability and indemnification obligations for the Investor.
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This version is drafted for Canada. Provinces differ on employment standards and Quebec applies civil law rather than common law. Tell GitLaw which province applies and it adjusts the draft.
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