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He isn't a close friend. I'm asking for enough cash to make sure he is serious. In the same vein, I would like to have an agreement that, should he get an inves

by Zigurd 6y ago

He isn't a close friend. I'm asking for enough cash to make sure he is serious. In the same vein, I would like to have an agreement that, should he get an investment, would top me up to close to my usual rate. The idea of a UCC lien is a very interesting idea, however, in this case, there is a very limited amount of work to do before a zero-stage investor is pitched. If that does not fly, I would of course lose all the non-cash compensation, and the limited amount of code existing would not be saleable or otherwise useful without a lot more work. No patents are involved yet, and even if they were, there would be the time and effort to go from a provisional to a full application involved. If one were in a situation where compensation, over a longer time, is mostly in founder's shares and there is an asset sale at the end of an unsuccessful run, I can see such a lien being a really good idea. To clarify and narrow my question: Is taking a SAFE fair? I'm pretty sure it can be fair to me. But is it fair to the founder? Fair to an investor who finds there is a founder-ish person in his same stock class? Thanks for the very thoughtful response!

davismwfl 6y ago
You're welcome. The obligatory IANAL. If you are an accredited investor and meet the guidelines according to the SEC then by all means a SAFE is totally fine although I'd still advise against it for what you are doing. But if you don't meet the requirements as an accredited investor executing a SAFE is dangerous for you and the founder as it may (likely will) turn off other investors who are even more risk adverse now than in the recent past. Just my 2 cents, but unless what you are trying to secure is > $100-120k in fees you are going about it in a way which will raise lots of questions for the founder when they do go to raise and have little benefit for either of you. A founder owing some consulting debt at their seed round is not abnormal and is seen often, but a founder owing debt with stock guarantees/promises to a non-accredited investor is an issue that will come up during any due diligence. I think you can definitely do a deal here if you really want, just need to explore other options which are less likely to raise questions and stick with common patterns because investors are worse then a deer in the woods. If they see anything out of the ordinary on a cap table or diligence sheet it can at worst spook them for good or at best just leave a sour taste in their mouth which means everything else is an uphill battle of proof for the founder.

by Zigurd 6y ago

davismwfl 6y ago

You're welcome. The obligatory IANAL. If you are an accredited investor and meet the guidelines according to the SEC then by all means a SAFE is totally fine although I'd still advise against it for what you are doing. But if you don't meet the requirements as an accredited investor executing a SAFE is dangerous for you and the founder as it may (likely will) turn off other investors who are even more risk adverse now than in the recent past. Just my 2 cents, but unless what you are trying to secure is > $100-120k in fees you are going about it in a way which will raise lots of questions for the founder when they do go to raise and have little benefit for either of you. A founder owing some consulting debt at their seed round is not abnormal and is seen often, but a founder owing debt with stock guarantees/promises to a non-accredited investor is an issue that will come up during any due diligence. I think you can definitely do a deal here if you really want, just need to explore other options which are less likely to raise questions and stick with common patterns because investors are worse then a deer in the woods. If they see anything out of the ordinary on a cap table or diligence sheet it can at worst spook them for good or at best just leave a sour taste in their mouth which means everything else is an uphill battle of proof for the founder.