SAFE: Simple Agreement for Future Exoneration

Version 1.4 (post-money, post-incident)

THIS INSTRUMENT AND ANY LIABILITIES ARISING HEREUNDER HAVE NOT BEEN REGISTERED WITH ANYONE, AND THE PARTIES WOULD PREFER TO KEEP IT THAT WAY.

[COMPANY NAME], or whatever it is called by the time you read this
SAFE
(Simple Agreement for Future Exoneration)

THIS CERTIFIES THAT in exchange for the payment by Yikes Combinator (the "Investor") of $500,000 (the "Purchase Amount") on or about [date, to be backfilled], [Company] (the "Company") issues to the Investor the right to certain shares of the Company's upside, and to none of the Company's anything else, subject to the terms below.

1. Events

(a) Equity Financing. If there is an Equity Financing, this Safe converts into the greater of (i) Standard Preferred Stock or (ii) whatever the new investors got, plus a little.

(b) Liquidity Event. If there is a Liquidity Event, the Investor is paid first. For clarity, "first" means before employees, before customers, before creditors, and before any class of persons who have recently become a "class" in the legal sense.

(c) Liability Event. If there is a Liability Event, this Safe automatically converts into a document the Investor has never seen. The Investor will be as surprised as anyone. The Investor's surprise is a material term of this agreement and the Company agrees to support it, including under oath.

(d) Dissolution Event. If the Company dissolves, the Investor is entitled to the Purchase Amount, the domain name, and the founders' next company.

2. Definitions

"Downside" means all losses, harms, damages, injuries, externalities, and second-order effects of the Company's business, whether to users, bystanders, municipalities, the water table, or the unborn. Downside is not a security and is not transferred by this instrument, because it was never the Company's to begin with; it has always belonged to Others.

"Others" means persons who are not a party to this agreement, which is what makes them so useful.

"Liability Event" means an indictment, consent decree, congressional invitation, investigative podcast of six or more episodes, or any event after which the Company's Wikipedia page acquires a section titled "Controversy."

"Knowledge" means actual knowledge, written down, in a channel with retention turned on. The Investor has no Knowledge and has configured its retention settings accordingly.

"Post-Money Valuation Cap" has its ordinary meaning. There is no corresponding cap on Downside. This is the core insight of the asset class.

3. Company Representations

(a) The Company is a corporation duly organized in Delaware, with subsidiaries in places that were described to the founders as "also fine."

(b) To the Company's Knowledge, which the Company has taken reasonable steps to minimize, the Company's product is legal, or was when the Company last checked, or is in a jurisdiction where that question is not well-formed.

4. Investor Representations

(a) The Investor is an accredited investor, as that term is defined, and a passive one, as that term will be argued.

(b) Any advice the Investor gave at office hours was hypothetical. Any advice the Investor gave at Tuesday dinner did not occur, as Tuesday dinner is off the record, and also there is no Tuesday dinner.

5. Miscellaneous

(a) Dispute Resolution. Any dispute arising under this Safe will be resolved by binding arbitration, conducted by an arbitrator selected by the Investor, in a location selected by the Investor, aboard a vessel selected by the Investor (see Oceania Pharmaceuticals, YC S23, for availability).

(b) Survival. Sections 2 and 4 survive termination of this Safe, dissolution of the Company, and, where applicable, the users.

(c) Entire Agreement. This Safe is the entire agreement between the parties. Anything a partner said out loud is, per Section 4(b), not.

(d) Counterparts. This Safe may be executed in counterparts, by DocuSign, or by a Chief Accountability Officer retained for the purpose (see Scapegoat, YC W25).

(Signature page follows, in a separate file, on a different server.)

Satire. Yikes Combinator is not affiliated with Y Combinator, and no person named here is real. More from the library · Discuss on Hazard News