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How to raise money? SAFE?
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How to raise money? SAFE?

lentrolentro Member, Host Rep

For other LET companies -

How did you raise money? SAFE, convertible loan, or outright equity?

Some angels reached out to invest in my company. I've known them for quite a bit of time, and they're quite flexible on how we structure this — they're good people. I just don't know how to actually take their money haha :)

SAFE: The math is a bit weird, but this seems like the best way to do it
Convertible loan: A bit scared to do this. At an old company, they took money via a convertible note but got screwed over when their valuation didn't rise because a convertible note is debt. I don't want this to happen to my company.
Outright equity: This is the simplest, but we'd have to re-structure as a Delaware C-corp from an LLC, which would complicate our taxes


  • Not an LET company but don't take a loan.

    Do you absolutely have to raise money? Or can postpone? If the latter I'd advice to do so.

    Thanked by 1Havy
  • Agree with @Kassem.

    Do you need the money? If you don't then maybe continue talking with them but keep them at bay for when you next need a drop of funding.

    Realistically, you should probably be talking to a CPA or an accountant who will advise you on how to structure these business interactions and then a lawyer to tell you how to limit the legal ramifications of all of this.

    Don't ask LET. None of them have actual certification nor legal degrees. Contact a CPA.

    Thanked by 1lentro
  • HalfEatenPieHalfEatenPie Member
    edited October 2022

    Also for a company like yours, you should already have a CPA on retainer or something handing your taxes. If you're not then... oof.

    And by oof I mean... Get a CPA.

    Also PM me if you need further information on the various avenues of handling these things.

    Thanked by 2lentro skorous
  • Convertible loan is the most common because it is so easy to do, also no huge overhead costs and efforts for lawyers etc. You have to have an idea what should trigger the conversion and when it should happen.
    If you use an established contract template you should be safe from getting screwed. Also be open to the investors what they can expect and make sure that they understand that it is risk capital, meaning it can be gone completely without any security.

    Thanked by 1lentro
  • A safe is a good way to get money.

    Thanked by 1lentro
  • serv_eeserv_ee Member
    edited October 2022

    Oooof. Any time anyone mentions convertible loan it gives me PTSD about OTC

  • lentrolentro Member, Host Rep

    @serv_ee said: convertible loan

    Yes, our accountant told us the SAFE would be the the best because it's an instrument to raise money without the cons of a convertible loan :)

    We are starting to go on a GPU hardware purchasing spree, so the additional cash at a minimal equity dilution (good valuation) is quite helpful for the business.

  • @lentro

    Why would an subchapter S corporation not work?

    In many ways, an S corporation is a hybrid of a C-Corp and an LLC.

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