4 ms·

Ask HN: Can we sell SAFEs for startups as futures contracts?

5 points by mixeden 3y ago

b20000 3y ago
a future contract is for the delivery of a commodity, which has some kind of non zero value the market agrees on startups can have zero value and until there is substantial IP there or customer base it remains zero so i don’t see how SAFEs can become futures contracts
nivertech 3y ago
SAFEs are futures contracts, but they usually aren't transferrable ("resselable", "tradable", or "marketable"). The resellability of a SAFE depends on the terms & conditions specified in the agreement. Usually SAFEs have restrictions on transferability, meaning they cannot be resold or transferred to another party without the company's consent. Also even if the SAFE allows transferability, it might be sold to Accredited Investors only (at least in the US). It's a very bad idea for a startup to allow SAFE transferability, as you will not know who are your investors. And it will become a hell to locate all of them once you'll do a priced round. There was some over-the-conter trading in Telegram ICO SAFTs[1] though. NOTE: IANAL -- [1] SAFT - Simple Agreement For Future Tokens
- mixeden 3y ago
  > It's a very bad idea for a startup to allow SAFE transfers, since you won't know who your investors are. What about taking a 5-10% commission on the transaction value if the SAFE is transferred? This would be an incentive to create transferable SAFEs, since you will make money every time someone sells them. > It's a very bad idea for a startup to allow transferable SAFEs, since you won't know who your investors are. And it will turn into hell when you do a price round. You could add a statement into SAFE that each party in the event of a SAFE transfer must send you a letter identifying the new party.
  - nivertech 3y ago
    The main advantages of YC SAFE are: 1. standardization (and thus simplicty and familiarity to investors) 2. no or low legal fees comparing to priced rounds 3. postponing negations about valuation 4. non-debt instrument unlike convertible notes (no interest accumulation and/or replayment triggers) Once you'll start customizing them, you will lose advantages ## 1 and 2. By allowing secondary trading in SAFEs you basically trying to recreate shares or tokens, and you will have to hire a very expensive securities lawyers, and even then it will not guarantee that you're not breaking the law (at least in US).

5 points by mixeden 3y ago

b20000 3y ago

a future contract is for the delivery of a commodity, which has some kind of non zero value the market agrees on startups can have zero value and until there is substantial IP there or customer base it remains zero so i don’t see how SAFEs can become futures contracts

nivertech 3y ago

SAFEs are futures contracts, but they usually aren't transferrable ("resselable", "tradable", or "marketable"). The resellability of a SAFE depends on the terms & conditions specified in the agreement. Usually SAFEs have restrictions on transferability, meaning they cannot be resold or transferred to another party without the company's consent. Also even if the SAFE allows transferability, it might be sold to Accredited Investors only (at least in the US). It's a very bad idea for a startup to allow SAFE transferability, as you will not know who are your investors. And it will become a hell to locate all of them once you'll do a priced round. There was some over-the-conter trading in Telegram ICO SAFTs[1] though. NOTE: IANAL -- [1] SAFT - Simple Agreement For Future Tokens

mixeden 3y ago
> It's a very bad idea for a startup to allow SAFE transfers, since you won't know who your investors are. What about taking a 5-10% commission on the transaction value if the SAFE is transferred? This would be an incentive to create transferable SAFEs, since you will make money every time someone sells them. > It's a very bad idea for a startup to allow transferable SAFEs, since you won't know who your investors are. And it will turn into hell when you do a price round. You could add a statement into SAFE that each party in the event of a SAFE transfer must send you a letter identifying the new party.
- nivertech 3y ago
  The main advantages of YC SAFE are: 1. standardization (and thus simplicty and familiarity to investors) 2. no or low legal fees comparing to priced rounds 3. postponing negations about valuation 4. non-debt instrument unlike convertible notes (no interest accumulation and/or replayment triggers) Once you'll start customizing them, you will lose advantages ## 1 and 2. By allowing secondary trading in SAFEs you basically trying to recreate shares or tokens, and you will have to hire a very expensive securities lawyers, and even then it will not guarantee that you're not breaking the law (at least in US).