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We are taking SAFEs in lieu of cash interest for seed stage companies. For later rounds there is flexibility given to the company to optimize the cash interest
by rchachra 5y ago
We are taking SAFEs in lieu of cash interest for seed stage companies. For later rounds there is flexibility given to the company to optimize the cash interest versus SAFE based on cash flows of the company.
- e1g 5y agoCan you give a specific example of how I will pay you back after I borrow $100k? It sounds like I have to return the $100k, plus some percentage of equity (in lieu of interest). If so, this sounds like an option for angels to take a position in a YC-backed company, and it would be friendly towards founders to label this product as equity financing and describe how the equity percentage is calculated.
- rchachra 5y agoWhen you borrow $100k you repay the principal or $100k after your Demo Day fund raise and in lieu of interest we will receive a $20k uncapped MFN SAFE. In case the startup fails to raise sufficient funds to make the repayment, then the entire principal will be converted in a SAFE at a pre-agreed cap.
- dustingetz 5y agoWhat is the repayment term, 3 months?
- rchachra 5y ago6 months is the standard Demo Day note but can be reduced to 3 months on a pro-rata basis.
- GordonS 5y agoSorry, what are "SAFE" and "MFN SAFE"?
- zachthewf 5y agoSafes are the most common way for startups to raise seed today. You can read about them here: https://www.ycombinator.com/documents/#about https://www.ycombinator.com/documents/#about