The Simple Agreement For Equity (SAFE) was originally developed by Y Combinator and has been adapted for use in Pakistan's growing startup ecosystem. This version of the SAFE agreement is specifically structured to comply with Pakistani corporate law, securities regulations, and foreign investment requirements where applicable. It serves as an efficient alternative to convertible notes, allowing startups to raise capital without immediately setting a valuation or issuing shares. The document includes essential provisions for conversion triggers, valuation caps, and investor rights, while incorporating necessary elements to ensure enforceability under Pakistani law. This agreement is particularly useful for early-stage startups seeking quick and efficient fundraising mechanisms, while providing investors with a standardized instrument that balances simplicity with adequate protection of their interests.
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1. Parties: Identification of the company and the investor, including full legal names, registration details, and addresses
2. Background: Brief context explaining the purpose of the agreement and the company's intention to raise capital
3. Definitions: Key terms used throughout the agreement, including 'Equity Financing', 'Liquidity Event', 'Dissolution Event', and 'Post-Money Valuation Cap'
4. Investment Amount: Specification of the investment amount and payment terms
5. Events Triggering Conversion: Details of events that trigger conversion of the investment into equity, including Equity Financing, Liquidity Event, and Dissolution Event
6. Conversion Mechanics: Specific methodology for converting the investment into equity shares, including valuation calculations
7. Company Representations: Standard representations about the company's legal status, authority to enter agreement, and capitalization
8. Investor Representations: Investor's representations regarding investment sophistication and compliance with securities laws
9. General Provisions: Standard clauses including notices, amendments, governing law, and dispute resolution
1. Most Favored Nation: Provision ensuring the investor receives the benefit of more favorable terms given to other SAFE holders - include when requested by sophisticated investors
2. Pro-rata Rights: Rights of the investor to participate in future funding rounds - typically included for larger investments
3. Information Rights: Investor's rights to receive company information - usually for significant investment amounts
4. Foreign Investment Provisions: Additional provisions required when the investor is not Pakistani - include for foreign investors
5. Board Observer Rights: Rights to observe board meetings - typically for strategic investors or large investments
6. Shariah Compliance: Additional provisions ensuring compliance with Islamic finance principles - include when required by investors
1. Schedule A - Company Capitalization: Current cap table and details of all outstanding convertible securities
2. Schedule B - Investment Terms: Detailed terms including investment amount, valuation cap, and/or discount rate
3. Schedule C - Form of Share Certificate: Template for the share certificate to be issued upon conversion
4. Appendix 1 - Conversion Examples: Numerical examples showing how conversion would work in different scenarios
5. Appendix 2 - Required Corporate Approvals: Copies of board resolutions and other corporate approvals for the SAFE
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