SAFE and KISS - Convertible Equity in Canada

Background history of SAFE and KISS to set the context for a discussion on use in Canada.

Transcript

1. SAFE and KISS - Convertible Equity in Canada Capital Mission II, Victoria, BC February 2017
2. SAFE History • Premier accelerator Y Combinator created the SAFE — Simple Agreement for Future Equity — as a replacement for Convertible Notes • Announced December 2013, created by YC partner Carolynn Levy, who also wrote the Series AA docs with Wilson Sonsini in 2008 • Designed to fix issues with convertible notes being debt, and regulations around debt, such as fixed term and market interest rates
3. Context for SAFE • Many companies going through early stage financing in a short period • Relatively frothy environment — Demo Day, guaranteed matching funds, and other investor interest meant relatively little worry about closing a next financing in 3 - 6 months • Deals getting done on a handshake where the main question is amount of investment, not any other negotiation
4. Convertible Equity • Now that the concept is out there, let’s train ourselves to not say SAFE — since that refers to a very specific document created by Y Combinator — but instead talk about Convertible Equity • 500 Startups released KISS — Keep It Simple Security • Also recognized “complex conversion scenarios”, came up with standardized Convertible Debt and Convertible Equity documents (without interest or maturity) • NACO Common Docs working on Lean Equity Alternative Financing (LEAF) as a standard for Canada
5. Convertible Equity in Canada • Founders read US sources, and are accepted into YC and other programs • Founder-led term sheets mean that founders ask a buddy for a template, and Word docs get passed around of some Canadianized SAFE • Investors aren’t used to seeing them yet, and there are basically no online education sources for Canada
6. References • YCombinator: Announcing the Safe, a Replacement for Convertible Notes https:// blog.ycombinator.com/ announcing-the-safe-a- replacement-for- convertible-notes/ • YC SAFE Docs http:// www.ycombinator.com/ documents/ • 500 Startups KISS http:// 500.co/kiss/ • StartupNorth from CDL / Dentons http:// startupnorth.ca/ 2014/09/05/making- canada-safe/ • NACO Common Docs http://nacocanada.com/ commondocs/