Dear SaaStr: Is it OK to Modify the Standard SAFE Form?
There’s an issue I see blow up several times now as an investor. It’s when a founder takes a so-called standard SAFE … and modifies it, and doesn’t really tell the investors it is sent to. Here’s what I’ve seen over the years:
- Removing antidilution protection
- Converting to last round security, not next round
- Converting to common, not next round security / preferred
- No premium / no return if company acquired before conversion
- Allowing unilateral amendment of the terms by the company
- Etc. etc.
A standard SAFE note isn’t all that safe, for founders or investors — but it is fast and simple. That’s its beauty.
But with that comes a large degree of trust. Trust that the SAFE at least is “standard”. Especially because investors rarely review a SAFE, and almost never get a redline of any changes made. If you change the standard terms, most investors will never know.
Changing standard terms without telling investors explicitly? I think it’s wrong, because it breaches trust. If you do change the terms — let your investors clearly know what’s changed vs. the standard forms. And importantly, let any larger investors know to feel free to have it reviewed by legal.
Or … just don’t change the standard terms.
(little changes image from here)
