SAFE vs. KISS, the evolution of the convertible note by Giorgia Coltella

TL;DR - SAFE and KISS are ways for young startups to get funding fast.

Helpfulness - 5

Topic Tags - SAFE, KISS, debt, seed,

Questions answered:

  • What is a SAFE?
  • What is a KISS?

Summary:

  • Traditional debt may be hard for start-ups to acquire: enter SAFE and KISS.
  • These contracts are usually short, 5 pages, and are not elaborately negotiated.
  • These contracts allow the investor to convert the money invested into preferred stocks at a discounted price when the start-up raises money from equity.
  • SAFEs convert at any future equity financing, the terms of investment are also usually deferred till then.
  • SAFEs have valuation caps, which favors the investor and protects them from early exits.
  • SAFEs do not have an expiration date or accrue interest, no exploding clauses, and only negotiable topics are cap and discount. Full clauses listed on the source.
  • KISS has similar goals to SAFE, fast cheap funding for young startups.
  • KISS may or may not have an interest and maturity date. If they have a maturity date, it is 18 months. KISS also has an MFN clause, which helps the investor trade-in for “better securities in the future if issued by the company”. KISS also has exit agreements and other clauses. Full clauses listed on the source.

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