Why ownership coins are the natural successor to the SAFE
Michael from
@dba_xyz on where ownership coins fit in the history of startup financing:
"A lot of people don't know the financing history of private companies. We used to do preferred equity. A preferred equity transaction takes between 6 to 10 weeks and costs 30K to 100K, depending on what type of governance covenants are in the docs. We moved to convertible debt, then the SAFE, because people thought this doesn't make sense for the right way to finance an early company, we need a much lower friction way to get capital quickly"
"When we saw this structure, I thought it was a logical next step, what comes after the SAFE for startup financing. You can do it much quicker, there's way fewer terms to negotiate, we don't spend a couple weeks on red lines with attorneys. You also get all the governance rights that a SAFE misses. A SAFE has absolutely no control or governance, it's an outstanding instrument that has to convert before you have real rights"
"We don't think you need to do this traditional 10% private financing every single time. There's a world where you do ten 1% transactions, where you have clear KPIs and metrics that get hit, and companies are able to raise capital at a lower price, because they're selling less equity, quicker, and it takes less of their headache to do so" -
@different_mj