Any experience doing a SAFE raise with friends & family?
I'm just curious if anyone has tried to go through with a SAFE (Y Combinator) investment round with friends, family and colleagues?
https://www.ycombinator.com/documents/
Right now I'm self funding the development of the MVP, but I'm going to need more time once v1.0 is release to shift over to getting it in front of potential buyers and make sales. Was thinking this might be a route that is viable for me to raise an additional 6-12 months of personal living expenses.
Curious if anyone has tried it and what their experiences were.
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SAFEs are definitely the way to go if you're looking for non-VC funding. The experience is as good as it can be re fiundraising. You avoid conversations about valuation and discuss simpler terms like a "discount rate" and "valuation cap". The main advantage is that it pushes the need to figure out a fair valuation further down which saves you a ton of time.
It also gives comfort that to less sophisticated investors that they won't be the ones having to figure out things like FMV (fair market value).
If you have more questions, ping me directly. Did a bunch of these last month so it's fresh.
Hi @hashemito — looking for some insight on the "accredited investor" stipulation in SAFEs. Did you adhere to this? Meaning, did you only raise money from Friends & Family with a net worth >$1M?
All of our early investors were accredited. But my understanding is it can be done, just requires a few additional hurdles to be dealt with with lawyers. Read these:
https://www.strictlybusinesslawblog.com/2011/08/15/can-a-friends-and-family-round-include-non-accredited-investors-should-it/
https://kkoslawyers.com/what-to-be-aware-of-in-the-friends-and-family-round-of-financing/
Ahh okay. Thanks for the resources!
Thanks for the reply, I've got a few questions in mind which I'll write down this week and send your way. Appreciate the offer.
Not a bad idea - how much would you need?
Best thing you can do for yourself and your investors is show progress in some sort of meaningful KPI. For most products, it's revenue. For some, it's users and/or GMV.
If you need money before you've reached progress on this type of KPI, that's a really bad sign.
Good point, I'll absolutely put some simple KPIs that my investors (many of which are unlikely to be tech/startup savvy) can track and see how well I'm doing. This raise would be no more than $50k just to give myself more time to get customers, otherwise I have to pick up a part time job and the project slows down.
Either way, I will absolutely be launching and doing what I can to gain traction on that front in advance of the pitch. Just thinking about it now as an option well before I need it given how long it takes to have those types of conversations and execute.
Also, you can do it on a rolling basis, $5k here, $10k there.