4 ms·

Carolynn Levy, Inventor of the SAFE

112 points by baxtr 4y ago

cebert 4y ago
I immediately assumed this article was about the Scaled Agile Framework (SAFe) and was pleasantly surprised.
- deleted 4y ago
  [deleted]
- jnsaff2 4y ago
  Yea, I thought so as well and was immediately terrified about their safety.
- Traubenfuchs 4y ago
  I already planned how I would balance hate speech and censorship when writing a response about how Carolynn Levy should be considered public enemy number one of developers and the murderer of real agile development.
- doctor_eval 4y ago
  It’s funny because it’s almost the opposite. “Simple Agreement for Future Equity”, an intentionally abbreviated legal document to make deals easier and, dare I say it, more agile. As opposed to SAFe, a methodology written by consultants, for consultants.
breck 4y ago
Really interesting. I did not know the origins. I do know the Levys (they used to have the early classes over for BBQs and it was awesome) and one thing I didn't pay attention to until now is how I would just always send crazy ideas their way and they would humor them and explain the legal issues around them. Now it all makes sense—Clevy was breaking new ground in the legal world (if there's one thing I never paid any attention to until recently its the legal world). Thanks for putting this history together Mercury!
divbzero 4y ago
I appreciate the conscious effort to be concise: “Writing a short legal document is actually quite hard. It’s a cliche — the simpler it is, the harder it is to do, and us lawyers are so used to writing for each other and not thinking about how short things should be.” — Carolynn Levy “The idea itself wasn't the innovation. The concept was similar to the convertible note. The innovation was writing such a short document without any of the complex pieces.” — Kirsty Nathoo
- halpmeh 4y ago
  In general, I find it crazy that we allow legal documents to be so complex. And not just complex, but comped to the point of being less clear than something stated in simple, plain language. Legal matters, both civil and criminal, are so of the most important things in a person’s life. How do we allow language that is only decipherable by “experts”? Even if you understand the language, the “correct” interpretation of that language is governed by decades and centuries of inscrutable case law. To me, this is a tragedy. Laws and contracts should be made in simple language understood by a majority of the populace. People have a right the understand the rules that govern them.
  - matthewmcg 4y ago
    In my experience there are three sources of complexity in contracts: (1) inherent complexity in the subject of the contract (2) a complex form being applied to a simple subject (3) bad drafting The first is sometimes unavoidable. For example, if you're drafting a loan document that has an interest rate based on a benchmark, it's probably not enough to reference that benchmark. You also want to include some provisions that will specify what happens if the benchmark ceases to be published. This kind of fulsome treatment makes contracts longer and more complex. The second is a a result of the way most lawyers work. It's far quicker (and therefore cheaper for the client, at least in the short term) to take an existing form and make changes to adapt it to a new situation than it is to create a bespoke contract. This reuse of forms propagates archaic language, needless "boilerplate" clauses, and the like. Many commonly encountered provisions are akin to junk DNA. They're included when the template is replicated but long ago ceased to have any function. Example: counterparts clauses or clauses "allowing" electronic signatures. [1] To me, the solution to this issue is to build contracts differently. Instead of starting with a recent precedent document and choosing "save as," we need to assemble them by carefully choosing well-drafted clauses from a library--think of a recipe for a convertible note that has "#include preemptive-rights" or something like that. Finally, drafting contracts well is a very specific skill. It's not a case of using the right "magic words." Rather, it's being able to describe the parties' bargain clearly and precisely. This isn't taught in most law schools, and most lawyers never bother to learn it systematically. Again, they're rushing to adapt existing forms that a colleague has blessed, and very shy about creating something new. I think most practitioners are aware of these factors but feel they can't really change them due to being caught in an hourly billing treadmill. In the article, Carolyn Levy says she couldn't' really tackle this problem until she went in house. That has been true for me as well. [1] https://www.adamsdrafting.com/counterparts-an-example-of-categories-of-contract-language-dysfunction/ https://www.adamsdrafting.com/counterparts-an-example-of-cat...
nocoiner 4y ago
I’m lawyer for private companies, though very rarely for VC-backed companies, and to my paranoid mind, the SAFE is at the end of the day not really much more than a term sheet on a handful of key economic terms. Which, in a high trust environment, is just fine the vast majority of the time and the reduction in transaction costs is almost always worth the trade-off! For instance, no one reads the deal documents they’ve paid hundreds of thousands of dollars for (if not more) after they’re signed … until there’s a commercial disagreement, and then every word, and sometimes punctuation marks, can make or break a case, so the docs get read VERY closely at that point. (This is an exaggeration, but directionally true.) But statements like the following from TFA (which I enjoyed quite a bit and found quite interesting) seem like they obviate the protections that are the sole reason for equity investment documents to exist: It seems to be that, after a certain point, the utility and success of the SAFE really is contingent on a founder's worldview — how much effort they put into tracking dilution, how closely they read the document when they sign off on terms, and whether they keep their promises to investors, even when they don't have to. If you don’t have to keep it, it’s not a promise! If the fundraising system relies on norms and reputations to enforce baseline expectations, you frankly don’t need contracts - a handshake, an email memorializing key terms and the whisper network is enough to keep founders and investors in line. But for any kind of reasonable legally enforceable rights and remedies, that’s gotta be documented - and unfortunately, usually at great length and expense. (Side note: private equity sponsors frequently, though not as often as they used to, push back on their counterparties in negotiations by telling them “trust us, we’re in the reputation business - if we screw you, no target/management team/issuer will ever take our money again.” When the sponsor has to choose between its IRR and its reputation, guess which it picks?) I think the SAFE is a cool instrument. I think it’s great for start-ups existing in the right cultural setting. But it’s less a legal innovation than a thoughtful short-form summary of a standardized set of commercial terms. Question to any VC lawyers who happen to see this - have there been many SAFEs litigated?
- gumby 4y ago
  > For instance, no one reads the deal documents they’ve paid hundreds of thousands of dollars for (if not more) after they’re signed The financing docs don’t costs hundreds of kilobucks, more like an outrageous 20K or so (with the investors’ lawyers’ bill coming out of proceeds — scandalous, as that’s what the 2% management fee is for!). An acquisition can cost a lot more. And actually I do always read the deal book. Because they are huge piles of cut/paste & patch, they are inevitably full of inconsistencies, overlooked deviations from the TS etc. None of which matters to get the deal signed, but as you say: potentially fatal down the road if a situation comes up when you actually need to consult it. Also notes were never a big deal to put in place; I used them on a deal just before COVID and it simplified a lot of things. SAFES are handy too, but I didn’t like the change to post-money which I find much less founder friendly.

112 points by baxtr 4y ago

cebert 4y ago

I immediately assumed this article was about the Scaled Agile Framework (SAFe) and was pleasantly surprised.

deleted 4y ago
[deleted]
jnsaff2 4y ago
Yea, I thought so as well and was immediately terrified about their safety.
Traubenfuchs 4y ago
I already planned how I would balance hate speech and censorship when writing a response about how Carolynn Levy should be considered public enemy number one of developers and the murderer of real agile development.
doctor_eval 4y ago
It’s funny because it’s almost the opposite. “Simple Agreement for Future Equity”, an intentionally abbreviated legal document to make deals easier and, dare I say it, more agile. As opposed to SAFe, a methodology written by consultants, for consultants.

breck 4y ago

Really interesting. I did not know the origins. I do know the Levys (they used to have the early classes over for BBQs and it was awesome) and one thing I didn't pay attention to until now is how I would just always send crazy ideas their way and they would humor them and explain the legal issues around them. Now it all makes sense—Clevy was breaking new ground in the legal world (if there's one thing I never paid any attention to until recently its the legal world). Thanks for putting this history together Mercury!

divbzero 4y ago

I appreciate the conscious effort to be concise: “Writing a short legal document is actually quite hard. It’s a cliche — the simpler it is, the harder it is to do, and us lawyers are so used to writing for each other and not thinking about how short things should be.” — Carolynn Levy “The idea itself wasn't the innovation. The concept was similar to the convertible note. The innovation was writing such a short document without any of the complex pieces.” — Kirsty Nathoo

halpmeh 4y ago
In general, I find it crazy that we allow legal documents to be so complex. And not just complex, but comped to the point of being less clear than something stated in simple, plain language. Legal matters, both civil and criminal, are so of the most important things in a person’s life. How do we allow language that is only decipherable by “experts”? Even if you understand the language, the “correct” interpretation of that language is governed by decades and centuries of inscrutable case law. To me, this is a tragedy. Laws and contracts should be made in simple language understood by a majority of the populace. People have a right the understand the rules that govern them.
- matthewmcg 4y ago
  In my experience there are three sources of complexity in contracts: (1) inherent complexity in the subject of the contract (2) a complex form being applied to a simple subject (3) bad drafting The first is sometimes unavoidable. For example, if you're drafting a loan document that has an interest rate based on a benchmark, it's probably not enough to reference that benchmark. You also want to include some provisions that will specify what happens if the benchmark ceases to be published. This kind of fulsome treatment makes contracts longer and more complex. The second is a a result of the way most lawyers work. It's far quicker (and therefore cheaper for the client, at least in the short term) to take an existing form and make changes to adapt it to a new situation than it is to create a bespoke contract. This reuse of forms propagates archaic language, needless "boilerplate" clauses, and the like. Many commonly encountered provisions are akin to junk DNA. They're included when the template is replicated but long ago ceased to have any function. Example: counterparts clauses or clauses "allowing" electronic signatures. [1] To me, the solution to this issue is to build contracts differently. Instead of starting with a recent precedent document and choosing "save as," we need to assemble them by carefully choosing well-drafted clauses from a library--think of a recipe for a convertible note that has "#include preemptive-rights" or something like that. Finally, drafting contracts well is a very specific skill. It's not a case of using the right "magic words." Rather, it's being able to describe the parties' bargain clearly and precisely. This isn't taught in most law schools, and most lawyers never bother to learn it systematically. Again, they're rushing to adapt existing forms that a colleague has blessed, and very shy about creating something new. I think most practitioners are aware of these factors but feel they can't really change them due to being caught in an hourly billing treadmill. In the article, Carolyn Levy says she couldn't' really tackle this problem until she went in house. That has been true for me as well. [1] https://www.adamsdrafting.com/counterparts-an-example-of-categories-of-contract-language-dysfunction/ https://www.adamsdrafting.com/counterparts-an-example-of-cat...

nocoiner 4y ago

I’m lawyer for private companies, though very rarely for VC-backed companies, and to my paranoid mind, the SAFE is at the end of the day not really much more than a term sheet on a handful of key economic terms. Which, in a high trust environment, is just fine the vast majority of the time and the reduction in transaction costs is almost always worth the trade-off! For instance, no one reads the deal documents they’ve paid hundreds of thousands of dollars for (if not more) after they’re signed … until there’s a commercial disagreement, and then every word, and sometimes punctuation marks, can make or break a case, so the docs get read VERY closely at that point. (This is an exaggeration, but directionally true.) But statements like the following from TFA (which I enjoyed quite a bit and found quite interesting) seem like they obviate the protections that are the sole reason for equity investment documents to exist: It seems to be that, after a certain point, the utility and success of the SAFE really is contingent on a founder's worldview — how much effort they put into tracking dilution, how closely they read the document when they sign off on terms, and whether they keep their promises to investors, even when they don't have to. If you don’t have to keep it, it’s not a promise! If the fundraising system relies on norms and reputations to enforce baseline expectations, you frankly don’t need contracts - a handshake, an email memorializing key terms and the whisper network is enough to keep founders and investors in line. But for any kind of reasonable legally enforceable rights and remedies, that’s gotta be documented - and unfortunately, usually at great length and expense. (Side note: private equity sponsors frequently, though not as often as they used to, push back on their counterparties in negotiations by telling them “trust us, we’re in the reputation business - if we screw you, no target/management team/issuer will ever take our money again.” When the sponsor has to choose between its IRR and its reputation, guess which it picks?) I think the SAFE is a cool instrument. I think it’s great for start-ups existing in the right cultural setting. But it’s less a legal innovation than a thoughtful short-form summary of a standardized set of commercial terms. Question to any VC lawyers who happen to see this - have there been many SAFEs litigated?

gumby 4y ago
> For instance, no one reads the deal documents they’ve paid hundreds of thousands of dollars for (if not more) after they’re signed The financing docs don’t costs hundreds of kilobucks, more like an outrageous 20K or so (with the investors’ lawyers’ bill coming out of proceeds — scandalous, as that’s what the 2% management fee is for!). An acquisition can cost a lot more. And actually I do always read the deal book. Because they are huge piles of cut/paste & patch, they are inevitably full of inconsistencies, overlooked deviations from the TS etc. None of which matters to get the deal signed, but as you say: potentially fatal down the road if a situation comes up when you actually need to consult it. Also notes were never a big deal to put in place; I used them on a deal just before COVID and it simplified a lot of things. SAFES are handy too, but I didn’t like the change to post-money which I find much less founder friendly.