What Type of Instruments Does Raze Support?

As a founder, it is important to be familiar with the different fundraising instruments available to you. Raze provides a comprehensive suite of fundraising tools to help you achieve your goals. From future equity, to priced equity, to debt, to even Revenue shares, Raze can support your instrument of choice to help you raise the capital you need. We support the following fundraising instruments.

SAFE

A SAFE (Simple Agreement for Future Equity) is a type of fundraising instrument that is used by startups to raise capital. It is a contract between an investor and a startup that gives the investor the right to receive equity in the company at a later date. The investor does not receive any immediate equity in the company, but instead receives the promise of equity in the future.

SAFEs are a good option for startups because they are simpler and less expensive than traditional equity investments. They also allow startups to raise capital without having to give up any control of the company. Additionally, SAFEs are flexible, allowing startups to adjust the terms of the agreement if needed.

When a startup issues a SAFE, the investor agrees to provide a certain amount of capital to the startup in exchange for the right to receive equity in the company at a later date. This equity is usually based on a predetermined valuation of the company, which is set at the time of the agreement. When the company reaches a certain milestone or achieves a certain valuation, the investor will receive equity in the company based on the predetermined terms of the agreement.

For more information on SAFE’s visit https://www.ycombinator.com/documents

Equity via Subscription Agreement

A subscription agreement for equity in a startup is a contract between a startup and an investor that outlines the terms of the investor's purchase of equity in the startup. The agreement typically includes the amount of equity the investor is purchasing, the purchase price, the vesting schedule, and any other terms the parties agree to.

How it works is that the investor pays the startup a certain amount of money in exchange for equity in the company. The startup then issues the investor a certain number of shares in the company, which the investor can then sell or keep as an investment.

A completed subscription agreement is considered a priced round when the investors have agreed to the terms of the agreement and the company has received the funds from the investors. This is the point at which the company has a valuation and the investors have agreed to purchase a certain amount of shares at that price.

In many cases, a priced round will result in a conversion event whereby any investors who invested on a SAFE will see the valuation cap or discount applied and they will be allotted shares in the company pursuant to the terms of the SAFE.

Revenue Share Agreement

A revenue share agreement is an agreement between two parties whereby one party agrees to share a portion of the gross revenue generated from a business in exchange for services or investments. This type of agreement is typically used when a company does not want to give up equity in exchange for investments or services.

Under a revenue share agreement, the investor or service provider will receive a percentage of the gross revenue generated by the business. This percentage is typically negotiated between the two parties and is usually based on the amount of the investment or services provided. The investor or service provider will typically receive their share of the revenue on a regular basis, such as monthly or quarterly.

Revenue share agreements can be beneficial for founders who do not want to give up equity in their business. This type of agreement allows founders to retain control of their business while still receiving the necessary investments or services to help them grow. Additionally, since the investor or service provider is only receiving a portion of the gross revenue, they are not as exposed to the risks associated with equity investments.

A revenue share agreement for gross revenue can be perpetual or capped at a certain payout amount by setting a predetermined percentage of the gross revenue to be paid out, and then either setting a maximum payout amount or leaving it open-ended.

For example, if the agreement states that 10% of the gross revenue will be paid out, and the maximum payout amount is set at $100,000, then the agreement will be capped at $100,000. If the agreement does not set a maximum payout amount, then it will be perpetual, meaning that the payment will continue for as long as the gross revenue continues to be generated.

Convertible Debt

A convertible debt agreement is a type of loan agreement between a company and an investor. The loan is typically structured as debt, with the investor providing the company with a loan that is due at a future date. However, the loan can be converted into equity in the company at a predetermined price. This allows the investor to convert their loan into an ownership stake in the company, rather than simply receiving repayment of the loan.

Convertible debt agreements can be a good choice for founders who are looking to raise capital because they provide the investor with the potential for a return on their investment, while also allowing the company to avoid the time and expense of a traditional equity financing. Additionally, the company can use the loan to fund operations and growth without giving up any equity in the company. Finally, the convertible debt agreement provides the investor with the option to convert their loan into equity at a predetermined price, which can be beneficial for both the investor and the company.

Needless to say, Raze does not assume responsibility for the contents of, or the consequence of using, any instrument or any other document found on our website. Before raising capital with any instrument, you should consult with a lawyer licensed in the country where your company was formed.