Algerian Startup Fund

Venture
Capital
insights
Empowering entrepreneurs with indispensable insights for navigating the VC
landscape, to confidently engage with investors and secure critical funding for
their growth.

Insight 1 : the SAFE

Algerian Startup Fund

SAFE
The Simple Agreement for Future
Equity is a mechanism developed by Y
Combinator to invest without the
immediate need to establish a
valuation.

It allows for quick investments and the

potential to receive equity at the next
priced equity round, with distinct
advantages.

Compared to convertible debts, SAFEs

are generally riskier and do not have
an interest rate or maturity date.
Algerian Startup Fund

What advantages does a

VC get ?
As the investor who used the SAFE invested earlier
and took more risk than other investors of the priced
round, the SAFE generally includes one or both of the
following advantages:
Discount rate: This means that the investor has a
discount on the stock price of the round in which
the SAFE converts.
Valuation cap: This means that there is a
maximum valuation at which the SAFE conversion
is done.
When the SAFE includes both advantages, the
advantage that offers the best conversion price for
the investor is retained.
Algerian Startup Fund

Examples:
Let’s suppose that you have raised $100,000 using a SAFE,
and that you are now raising funds at a priced round that is
$1 per share.

With a discount rate of 20%, With a premoney valuation

the SAFE will be converted
at a price of $0.80 per
share, which means that
the investor will receive a
total of 125,000 shares
100000$
=125000 shares
0.8$
cap of 2 million dollars, and
a number of shares before
the priced round of 4 million
shares, the price per share
for the valuation cap is :
2 million $
=0.5$
4 millions shares
This price is retained as it is
lower than the 1$ initial
price, thus converting to
200000 shares.
Algerian Startup Fund

SAVE THIS
POST FOR
YOUR FUTURE
FUND RAISING.