And in Silicon Valley, accounting for SAFE is just as simple – SAFS are equity contributions from early investors in start-ups. FAS is not debt. The idea that someone is discussing the fact that they could go into debt is strange and ridiculous for the financial professionals who work in Silicon Valley. SAFEs were created to avoid debt overcompensation! (Of course, some “FAS” have a repayment obligation after a specified period of time. Such “SAFEs” are of course only SAFEs in the name. Essentially, instruments with such clauses are nothing more than convertible debts under another name.) This is another case where current accounting standards do not adequately understand or take into account the realities of how FASCs work. For those who do not know, a safe is an agreement by which an investor provides an investment in a company that is converted into a preferential share guarantee if AND if a preferential capital is issued by an eligible capital increase. It is not like repayable debt, it does not support interest like debt, and risks and rewards are more oriented towards an equity investor. It is possible that the company will never go through a privileged round table because they are very successful and therefore it is never necessary to convert FAS and investors will never be reimbursed, unless there is a change of control. This is really a risky bet from an investor, especially a retail investor. At the end of 2013, Y Combinator published the Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt. [2] This investment vehicle is now known in the U.S. and Canada because of its simplicity and low transaction costs.

However, as use is increasingly frequent, concerns have arisen about its potential impact on entrepreneurs, particularly where several SAFE investment cycles take place prior to a private equity cycle[4] and potential risks to un accredited crowdfunding investors who could invest in the SAFes of companies that realistically, never receive venture capital financing and therefore never convert to equity. [5] SEC staff is a strange group of people who actually seem to believe that any accounting issue can be resolved with inflexible iron rules imposed without and in authority over each and every professional judgment. They are the antithesis of the global initiative for a more principled accounting regulatory system. (Indeed, they are probably the main reason for the overall advance towards a more principled accounting regulatory system. SAFE holders never have a mechanism to impose a preferred share financing cycle and the conversion of their invested funds into preferred shares. Safe owners do not have the ability to force the start-up companies in which they invest to do something. The decision whether or not to finance preferred shares and therefore convert SAFEs into equity units is entirely under the control of the company`s co-founders.