Question
A SAFE (Simple Agreement for Future Equity) note is a financial instrument used in early-stage investments. It allows investors to provide capital to a startup and in return, they receive the right to purchase equity in a future financing round. The benefit for the investor is that the SAFE note often includes terms such as a discount or a valuation cap, which can provide the investor with more shares for their investment when the company raises future financing. This can potentially lead to higher returns if the company is successful.
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Since your company has 3,000,000 shares, that means each share is now worth $4. And your uncle who invested $10,000 early on now gets 2,500 shares. Using simple math, the professional investors would have about 8% ownership of your company, and your uncle around 1%. However, because your uncle was an early investor, the SAFE note may grant him a Discount when purchasing his shares.
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