This article is essential reading for startup founders and early-stage companies in Ireland considering or preparing to take investment through Dogpatch Labs' accelerator programme.
It's particularly valuable for entrepreneurs who need to understand the implications of SAFE agreements before signing one, as it breaks down complex terms into practical examples.
Key Takeaways
A SAFE is an agreement where investors provide funding to a company now, in exchange for shares later. Doing it this way can be quicker and delays putting a value on a company too early.
Key points to know about the Dogpatch Labs SAFE:
Discount Rate - investors get a 20% discount when they convert their investment into shares.
Conversion Events - the SAFE converts into shares automatically if you raise at least €100,000 in a future funding round (not including solo investments from Enterprise Ireland).
MFN Clause - if you agree any future SAFEs with better terms than the Dogpatch Labs SAFE, Dogpatch Labs can adopt those better terms.
Sale/IPO Protection - in case of acquisition or IPO, Dogpatch Labs either gets their €100,000 back or receives shares at a 20% discount.
1. What happens to my Dogpatch Labs SAFE if I raise money from Enterprise Ireland?
Enterprise Ireland investments alone don't trigger the SAFE conversion. The SAFE only converts when you raise at least €100,000 from other investors, excluding Enterprise Ireland investments.
2. Does Dogpatch Labs get voting rights with their SAFE?
No, the SAFE itself doesn't include voting rights. However, once the SAFE converts to shares, Dogpatch Labs will receive the same rights as other investors in that funding round, including any voting rights attached to that share class.
3. How is the 20% discount applied in practice?
When your company raises a priced round, Dogpatch Labs gets to purchase shares at 80% of the price other investors pay. For example, if new investors pay €20 per share, Dogpatch Labs would pay €16 per share.
4. What ongoing obligations do I have to Dogpatch Labs after taking their SAFE investment?
You must provide quarterly and annual financial accounts and inform Dogpatch Labs before issuing any new shares (except to employees).
5. Can the SAFE agreement be terminated early?
The SAFE can only end through conversion after a qualifying investment, sale/IPO, company liquidation, or if both parties agree to a repayment. There is no standard maturity date.
