A SAFE financing can be closed in as little as 1-2 weeks. However, the timeline will depend on the amount of negotiation required and the number of investors involved in the financing round.
Any financing will begin with preliminary due diligence. The company’s corporate lawyers will confirm the corporate approvals that will be required for the company to conduct the SAFE transaction. The company should discuss with its lawyers the intended terms for the SAFE round. This might include any discount or valuation cap applicable to the SAFEs, the amount of money it wishes to raise (which impacts dilution of existing stockholders), and any additional rights the company wishes to offer to investors, such as pro rata rights or most-favored nation (MFN) rights.
Next, the company’s lawyers will prepare the necessary documentation. The lawyers will draft and help obtain any necessary approvals from the company’s board of directors and/or existing stockholders. They would also draft a form of SAFE, as well as any necessary side agreements negotiated between the company and its investors, and distribute these documents to the relevant investors for review. When the company has compiled a list of committed investors and their addresses, the lawyers will assess whether federal or any state securities laws require any securities filings.
When the documentation is finalized, the company may begin closing the investments (i.e., receive money and issue the SAFEs). Typically, the company’s lawyers will coordinate obtaining signatures from the company and the investors, send the company’s wire instructions to investors, and track incoming signatures and money. As signatures and money arrive, the lawyers will compile and finalize the SAFEs and any other side agreements with the dates of closing (the date the company receives an investor’s money) and distribute final transaction documents to the relevant parties.
When the SAFE financing round is fully closed and completed, the lawyers can help update the company’s capitalization records, make any necessary securities filings, and record notes about any extraordinary investor rights for future reference by the company.