Ask HN: How does a cash acquistion with SAFEs work?
I hope this doesn't come across as too stupid of a question. There is so much insight for more complex situations, but nothing I saw that clearly explained this simple situation. Want to make sure I'm not over/under thinking this.
Let's say a simple LLC business has two standard post-money SAFEs....
- Investor A contributed $40,000 at a post-money valuation cap of $400,000
- Investor B contributed $50,000 at a post-money valuation cap of $800,000
- There are no other investors
Questions: If the business is fully sold for $600,000 all cash, does Investor B still receive 6.25% of the acquisition cash even if the sale is under their valuation cap?
I guess:
A gets $60000 which is 10% due to cap.
B is below cap so gets $50k worth of shares in the pile of cash. Or $50k if you like.
Check the terms: it becomes debit or prorated shares