The SAFE (Simple Agreement for Future Equity) contract was introduced in 2013 by the startup accelerator Y Combinator LLC, an American startup accelerator and venture capital firm launched in March 2005.
A SAFE is a simple agreement where investors provide capital to a company in exchange for the right to receive equity (shares or membership interests) at a future financing event.
1. The primary advantage of the contract is the right to future equity ownership, as the contract is not a loan. SAFE avoids the need for an initial valuation of the company, which simplifies the process and reduces legal costs. It can include clauses such as discounts or valuation caps that offer advantages to investors based on the company’s future performance.
2. This mechanism is regulated and supervised by the U.S. Securities and Exchange Commission (SEC), the Federal Government Agency responsible for regulating financial markets in the United States.
3. Within our organization, we will make sustained efforts to highlight the importance of SAFE contracts and facilitate their registration with our regulatory authorities. In this regard, we will propose clear legal regulatory mechanisms for SAFE contracts to make them eligible for startups.
4. Companies issuing SAFEs must provide investors with clear and precise information about the terms of the agreement and associated risks. The SEC imposes transparency obligations to protect investors. The SEC can audit and verify companies to ensure they comply with regulations and prevent potential abuses or fraud. Through its regulations, the SEC tries to balance the need to protect investors with the necessity of allowing startups to innovate and grow.
5. The use of SAFE contracts in the Moldovan startup ecosystem can accelerate the financing process, reduce costs and administrative complications, and create a more attractive environment for investors, thus supporting the growth and development of startups.
We invite you to consult the SAFE Framework Contract. Although the current national legal framework does not explicitly regulate this type of contract, it can be successfully used in relationships with potential investors, producing effects between the parties.
Before using the SAFE contract draft, we recommend contacting Startup Moldova Legal at legal@startupmoldova.digital to ensure that all legal aspects are correctly addressed. Through these initiatives, we aim to support the development of startups by offering modern and efficient financial solutions.
