3 ms·

Not true. You can still raise on uncapped SAFEs. This will not trigger the YC MFN safe

rvnx 4y ago
According to the contract, in exchange of 375K USD (+/- salary for 1.5 developer) you agree to this when you sign the MFN: == If the Company issues any Subsequent Convertible Securities with terms more favorable than those of this Safe (including, without limitation, a valuation cap and/or discount) prior to termination of this Safe, the Company will promptly provide YCombinator with written notice thereof, together with a copy of such Subsequent Convertible Securities and, upon written request of YCombinator, any additional information related to such Subsequent Convertible Securities as may be reasonably requested by the Investor. In the event YCombinator determines that the terms of the Subsequent Convertible Securities are preferable to the terms of this instrument, YCombinator will notify the Company in writing within 10 days. Promptly after receipt of such written notice from the Investor, the Company agrees to amend and restate this instrument to be identical to the instrument(s) evidencing the Subsequent Convertible Securities. == So, any type of issue triggers the MFN and the jackpot to YC.
- vmatsiiako 4y ago
  What I'm saying is that you can issue the exact same $375k YC MFN SAFE to other investors (with a different $$ value). This will not trigger the MFN because the terms are absolutely the same
  - jedberg 4y ago
    Most small angels, like myself, will not do an uncapped SAFE. It's too risky when I'm only putting in $25K. I'd like to know at least very roughly how much I will own when it converts. I don't want to be in a situation where they never raise again and then exit for $100M five years later and I only get my small little piece with no benefit for being in early.
- alexashka 4y ago
  Can someone explain this like I'm 5? What does this mean in practice?
  - acecreamu 4y ago
    It means that MFN will likely convert very fast, and these 375k will cost you more dilution than you might want otherwise. Or you have to play very fancy sheningans convincing other investors who wanted to be early to wait, just to postpone it and decrease its dilution.
  - rvnx 4y ago
    Imagine you have a toy store, and you want to make it bigger and better. To do that, you need more money, so you ask your friend YCombinator to help you. In return, you promise to give them a special kind of toy money that you created (like monopoly money) that they can trade for real toys later when your store becomes bigger and better. But for now, there are no real toys to exchange yet because the shop is still small and not opened yet. Now, if you ask other friends for help and give them even better toy money (with better chances to get more toys), you need to tell YCombinator about it. If YCombinator thinks the new toy money is better, they can ask you to change the toy money you gave them earlier to match the better one. You have to do this quickly after YCombinator tells you they want the better toy money.

rvnx 4y ago

According to the contract, in exchange of 375K USD (+/- salary for 1.5 developer) you agree to this when you sign the MFN: == If the Company issues any Subsequent Convertible Securities with terms more favorable than those of this Safe (including, without limitation, a valuation cap and/or discount) prior to termination of this Safe, the Company will promptly provide YCombinator with written notice thereof, together with a copy of such Subsequent Convertible Securities and, upon written request of YCombinator, any additional information related to such Subsequent Convertible Securities as may be reasonably requested by the Investor. In the event YCombinator determines that the terms of the Subsequent Convertible Securities are preferable to the terms of this instrument, YCombinator will notify the Company in writing within 10 days. Promptly after receipt of such written notice from the Investor, the Company agrees to amend and restate this instrument to be identical to the instrument(s) evidencing the Subsequent Convertible Securities. == So, any type of issue triggers the MFN and the jackpot to YC.

vmatsiiako 4y ago
What I'm saying is that you can issue the exact same $375k YC MFN SAFE to other investors (with a different $$ value). This will not trigger the MFN because the terms are absolutely the same
- jedberg 4y ago
  Most small angels, like myself, will not do an uncapped SAFE. It's too risky when I'm only putting in $25K. I'd like to know at least very roughly how much I will own when it converts. I don't want to be in a situation where they never raise again and then exit for $100M five years later and I only get my small little piece with no benefit for being in early.
alexashka 4y ago
Can someone explain this like I'm 5? What does this mean in practice?
- acecreamu 4y ago
  It means that MFN will likely convert very fast, and these 375k will cost you more dilution than you might want otherwise. Or you have to play very fancy sheningans convincing other investors who wanted to be early to wait, just to postpone it and decrease its dilution.
- rvnx 4y ago
  Imagine you have a toy store, and you want to make it bigger and better. To do that, you need more money, so you ask your friend YCombinator to help you. In return, you promise to give them a special kind of toy money that you created (like monopoly money) that they can trade for real toys later when your store becomes bigger and better. But for now, there are no real toys to exchange yet because the shop is still small and not opened yet. Now, if you ask other friends for help and give them even better toy money (with better chances to get more toys), you need to tell YCombinator about it. If YCombinator thinks the new toy money is better, they can ask you to change the toy money you gave them earlier to match the better one. You have to do this quickly after YCombinator tells you they want the better toy money.