How does I explain SAFE agreements to a potential investor who has never invested in startups?
I wouldn’t use a SAFE with an investor that has never invested in start-ups. It’s too confusing and too big a learning curve.
Most folks understand buying stock, plain and simple. They’ve bought something. Cisco. A mutual fund. Apple. They get it, at least, mostly.
A SAFE has pros and cons for investors who have done this before. While not particularly investor-friendly, a SAFE has a huge advantage of being a known entity and is the faster and simplest way to raise capital from folks in the know. If it’s a very small investment, I prefer a SAFE. We get it from the YC site, fill out the few variables — done.
But for someone new to investing — sell them stock. The old fashioned way.
X shares for $Y, representing Z% of the company.
This is something everyone can understand.
Maybe it was always fine and the best way to do things, anyway.