Next Wave Partners, a leading global venture studio and strategy firm, has introduced and open sourced its innovative financial instrument called the Simple Agreement for Future Equity with Repurchase (Safer). This tool aims to disrupt traditional startup financing by safeguarding founder vision and ensuring early investors receive fair compensation for their initial risk. Designed in collaboration with renowned law firm Polsinelli PC, the Safer combines elements of equity and revenue-based financing, allowing startups to repurchase equity based on future revenues. The Safer is available for free access and customization, underscoring Next Wave Partners' commitment to fostering a more equitable startup financing ecosystem.
LAS VEGAS, Aug. 15, 2023 /PRNewswire-PRWeb/ -- Next Wave Partners, a leading global venture studio and strategy firm, today open sourced its pioneering financial instrument: the Simple Agreement for Future Equity with Repurchase, or Safer. Available free for anyone to use, the Safer represents a radical departure from traditional early-stage company financing, offering a solution that protects the vision and leadership of founders while rewarding early investors for their outsized risk. Positioned as the future of startup financing, the Safer emerges as an antidote to the traditional financing models that perpetuate inequality in the startup ecosystem.
The Startup Financing Problem
The Safer is born from the understanding that the traditional startup financing model, which prizes 'unicorn hunting' above all else, often leaves founders and early investors holding the short end of the stick. Typically, founders yield substantial equity too early — before they've even had the chance to validate product-market fit and prove their venture's potential. The Safer structure helps preserve the autonomy that makes startups so vibrant and innovative in the first place.
What's more, the Safer acknowledges data which shows founder-led startups tend to generate higher returns. The Safer doesn't just protect the founder's vision — it also enhances the likelihood of superior financial returns for investors.
At the same time, the Safer seeks to correct the longstanding imbalance faced by pre-seed and seed-stage investors. Traditional models expose these investors to significant risk while setting them up for considerable dilution in later funding rounds. The Safer flips this script by linking returns to future revenues, ensuring that the pioneers who believed in the startup first stand to reap rewards proportional to the risk they've assumed.
Ultimately, the Safer isn't simply a novel financial product. It's a clarion call for a more equitable startup financing model — one where both the visionaries who birth new ideas and the early believers who back them are given a fair shake.
James Thomason, Managing Partner at Next Wave Partners, noted, "We believe the startup ecosystem should share and collaborate to lift up founders and investors together. With the Safer, we are responding to a strong need for an instrument that upholds the audacity of founders, while also ensuring early investors are properly compensated for their leap of faith."
According to Next Wave Partners Managing Partner, John Cowan, "The Safer recalibrates the risk-reward equilibrium between founders and investors. For investors, it reduces uncertainty and provides an earlier return on investment. For founders, it reduces dilution risk and helps them focus on executing their vision."
Crafted in partnership with leading law firm Polsinelli PC, the Safer offers an innovative take on conventional startup financing, with the promise to shift the paradigms of power and profit in the startup landscape.
"When Next Wave Partners explained the Safer concept they were developing we instantly saw the potential and offered our support to help turn it into a fully featured investment instrument," said Chris Simpson, lead attorney on the project. "We believe this innovative financial instrument will help address some of the long-standing challenges in startup financing, providing a more equitable solution for both founders and investors."
How the Safer Works
The Safer operates as a hybrid, combining elements of equity and revenue-based financing. When an investor uses a Safer, they're buying equity in a startup but with an additional clause that pre-programs the repurchase of equity by the startup at a later date based on future revenues. This means that early investors can get a structured exit, which isn't tied to a traditional exit event like a company sale or IPO.
In contrast, a Safe, or Simple Agreement for Future Equity, is a contract between an investor and a company that provides rights to the investor for future equity in the company similar to a warrant. A Safe allows an investor to buy shares in a future priced round of investment. It lacks the repurchase agreement found in the Safer, and it doesn't provide a structured exit for the earliest investors unless a traditional exit event occurs.
Open Sourcing for Impact
In line with their vision to transform startup financing for the benefit of all, Next Wave Partners has chosen to openly source the Safer instrument and make it freely available to any interested parties. The Safer contract, terms, and related materials can be accessed via https://nextwave.partners/safer.
Next Wave Partners believes open collaboration and knowledge-sharing will accelerate adoption of progressive models like the Safer. James Thomason explained the rationale: "We want to fundamentally improve how startups raise money and reward the stakeholders who take risks. By open sourcing the Safer, we hope to empower the broader startup community to evolve startup financing for the betterment of all."
The firm invites the public to engage with the Safer - leverage it, customize it, and share feedback for ongoing improvement. By lowering barriers to entry and enabling community ownership, they aim to rapidly scale the instrument's reach. In the true spirit of open source, Next Wave Partners welcomes contributors across the ecosystem to advance the Safer for maximal positive impact.
About Next Wave Partners
Next Wave Partners is a global venture studio and strategy firm partnering with founders and corporate innovators to create bold new businesses, unlock exponential growth, and build better products and services, faster. Founded by repeat entrepreneurs John Cowan and James Thomason, Next Wave Partners offers a comprehensive suite of services designed to meet the evolving needs of today's innovators. Our venture capital fund invests in a broad range of opportunities poised to catch the next long wave of innovation. For more information visit https://nextwave.partners.
About Polsinelli
Polsinelli is an Am Law 100 firm with more than 1,000 attorneys in 22 offices nationwide. Known for delivering top-tier client service and establishing strong client relationships, Polsinelli is devoted to exceeding client expectations for what a law firm can be. Their legal team provides practical, business-savvy counsel across comprehensive corporate, transactional, litigation, and regulatory services. Polsinelli has a strong focus on sectors such as health care, real estate, finance, technology, private equity, and life sciences. For more information, visit http://www.polsinelli.com. Polsinelli PC, Polsinelli LLP in California, Polsinelli PC (Inc) in Florida.
Media Contact
John Cowan, Next Wave Partners, 1 725-222-3334, [email protected], https://nextwave.partners
SOURCE Next Wave Partners
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