How does a cash acquistion with SAFEs work?

Question

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 investorsQuestions: 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?

nivertech · Accepted Answer

Standard YC SAFE is for corporations (C Coprs), not for LLCs, as LLCs don't have shares to convert to, only membership units.
While there are SAFEs for LLCs, I don't get their purpose.
Maybe they can be useful for bootsrapping Micro-SaaS or lifestyle businesses.
https://jmdorsey.com/safe-for-llcs/
https://mccarthylg.com/can-an-llc-use-a-safe/

hehehheh · Answer

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.

ipaddr · Answer

Check the terms: it becomes debit or prorated shares