Convertibles: KISS bills and SAFE instruments

STARTUP: Young an innovative company with strong growth potential in terms of future value, which has yet to develop its product(s) and markets. The company has not yet fully determined its model business.

KISS: Keep It Simple Security (KISS) is a set of legal document templates developed by US business gas pedal 500 Startups in 2014.

SAFE : Simple Agreement for Future Equity (SAFE) is a set of legal document templates developed by US business gas pedal Y combinator in late 2013.

SAFE and KISS tickets are both relatively straightforward, allowing your STARTUP to obtain cash in return for a promise to distribute future shares at a value generally determined at the time of the first round of financing. 

To compensate investors for the additional risk involved in investing in a STARTUP, they receive a risk premium on their investment, which is included in the bills. This takes the form of a discount or premium in return for early investment in the company's development process. A 20% rebate, for example, translates into a discount on the share price in the first round. If the share price is set at 2$ in the first round of financing, then holders will be issued shares corresponding to a price of 1.60$ per share.

The bills also provide for a valuation cap for the investor holding the bill. If a valuation cap is set at $2 million in the agreement, and the company sells its shares at a valuation price of $5 million, the cap set in the conversion bill applies.  

The rules are simple, and the most favorable of the discount or cap applies in favor of the investor. These bills may also contain clauses in anticipation of possible future rounds of issues of other bills and participation rights.

Despite the peculiarities of this type of financing, the advantages are not negligible and can be very beneficial. What's more, it's important to note that new shareholders, like venture capitalists, bring more than just money to the table. Their contribution can be highly strategic, giving the entire organization the benefit of their networks of contacts. They also bring knowledge and experience to the organization.  

In addition to answering your questions, our SADC experts can help you make a real analysis of your situation. What's more, an analysis of your long-term needs and the determination of an appropriate financial strategy for your business could be developed at the same time.

See the list of different needs to the right that this financial product can meet. Don't hesitate to apply for financing from SADC. We'll be happy to support you as you think about your project and bring it to fruition.