To be eligible for the capital classification, “the unregistered stock count must be allowed. The contract allows the company to establish itself in unregistered shares. The launch of SAFE by Y Combinator is a great example of what Silicon Valley does best – innovation to make businesses cleaner, simpler, faster, more efficient and accessible to startup creators. Startup creators and their colleagues are very busy people, and their working time is most valuable for developing their technology, building their teams and caring for their clients – not for administrative burdens such as renegotiating convertible debt contracts with imminent maturities that settle on them. SAFE is a simple but brilliant innovation that protects startup creators from unnecessary administrative burdens and allows them to focus on the development of their business. With SAFEs, early investors invest in a start-up in exchange for the expected potential of future equities, i.e. preferred shares (which do not yet exist) at an undetermined time in the future, when the first pre-established cycle of preferred share financing will take place. This is not a creditor`s transaction, but an early equity investor. Assuming that the instrument is a liability and that the issuer does not choose (the fair value option) or is not necessary to measure the entire instrument at fair value, convertible debt securities and similar instruments require a targeted analysis of characteristics that require separate accounting as incorporated financial instruments (separately and valued at the fair value of each reference period). In particular, issuers should analyze their financing structures based on characteristics that offer a return on borrowing, for example. B on variable stock settlements. A common example is a conversion scheme for a convertible debt in which debt is converted to a conversion price in the next financing cycle, set with a significant discount on the price paid by other investors during this next financing cycle. In addition to the negative reasons why a SAFE investor should never receive equity in the company (such as the company that goes bankrupt before obtaining qualified financing), if the company is doing extremely well and never has to make financing that meets the conversion threshold, a SAFE investor can never obtain equity in the best performing start-ups.

, able to self-finance. SAFThes are financial instruments in which fishing investors or seed internships contribute to the creation of businesses in exchange for the opportunity to turn their investments into equity in the future, but only if certain future events occur. The form of financing of the credits of these agreements must be classified either as the following means: (i) debt; (ii) equity; or (iii) something in between — the so-called mezzanine, or temporary equity. It should be noted that, in an otherwise highly technocratic and rules-oriented area of accounting (the rule of accounting for derivatives as debt or equity), the CSA imposes in this case the exercise of the shutdown. It asks us to “analyze” whether an instrument “looks more like a equity instrument” or “rather a debt instrument.” This kind of language in the CSA is refreshing, and it supports our argument that FAS should be accounted for in equity and not as debt. The essential nature of FAS is that they are much more like equity than debt. The risk-return characteristics of FAS are venture capital, not debt. To be eligible for the capital classification, “there is no need to obtain guarantees. There is no obligation in the contract to file guarantees at any time or for any reason. Investors have the same reasons as the founders of SAFEs. The simplicity of the investment nature and standard presentation document allow investors to make decisions quickly, while reducing the pressure to meet deadlines