New York SAFE Note & Convertible Debt Lawyer

Seeking the services of a New York startup lawyer for SAFE notes and convertible debt instruments is vital for your early-stage startup to structure financing properly, which ensures compliance and protects your founders’ interests. New York has a strict regulatory environment under the Martin Act, and a sophisticated base of investors means you need an experienced startup lawyer like Daniel Weberman in your corner:

Understanding Instrument Nuances

Attorney Weberman has a thorough understanding of SAFE note nuances. SAFEs are not debt but agreements to issue equity upon a triggering event. They carry no interest or maturity date.SAFEs appear as potential equity on the cap table, not debt. Conversion increases share count, diluting existing shareholders based on valuation caps or discounts (typically 10–20%).

Post-money SAFEs clarify dilution upfront, while pre-money SAFEs can lead to unexpected dilution if multiple SAFEs are issued. SAFEs simplify early-stage fundraising due to their flexibility, but can complicate cap table projections if low valuation caps make subsequent rounds costlier for founders. Investors may demand pro-rata rights, impacting future allocations.

Attorney Weberman will clarify the nuances of SAFEs and convertible notes, and advise on which are appropriate for your startup company. He can draft agreements to reduce the chances of cap table surprises and ensure financial terms to support future funding rounds.

Navigating Securities Law Compliance

SAFEs and convertible notes are securities, requiring SEC registration unless exempt, typically under Rule 506(b) (no general solicitation, up to 35 sophisticated non-accredited investors) or 506(c), general solicitation, accredited investors only. Attorney Weberman ensures compliance with securities laws by verifying investor accreditation via questionnaires or third-party services; filing Form D with the SEC within 15 days of the first sale, detailing the offering and exemption, and managing “Bad Actor” rules under Rule 506(d), conducting due diligence on covered persons, to avoid disqualifications.

Non-compliance risks losing the exemption, triggering unregistered sale violations under Section 5 of the Securities Act, with penalties like fines or rescission.

Negotiating Critical Economic Terms

Attorney Weberman can help your startup by negotiating economic terms, such as valuation caps, discount rates, interest rates, and maturity dates. Caps set the maximum valuation at which SAFEs/notes convert, protecting your investors from high valuations in future rounds. Low caps increase founder dilution; high caps attract investors but may signal overvaluation.

Discounts (10–20%) reduce the conversion price relative to the next round’s price, rewarding early investors. High discounts dilute founders more; low discounts may deter investors. Interest (2–5%) accrues on convertible notes, increasing the conversion amount and dilution. High rates burden startups; low rates appeal to founders. Maturity (12–18 months) sets the repayment deadline if no conversion occurs. Short maturities pressure startups; longer ones risk investors demanding repayment or equity at unfavorable terms.

Attorney Weberman’s help as a startup lawyer is vital to negotiating these terms to balance investor and founder interests. He’ll ensure discounts and caps align with New York City’s market norms.

Ensuring Proper Conversion Mechanics

Conversion triggers are complex, and a startup lawyer like Daniel can greatly assist your company. SAFEs/notes convert upon qualified financing, acquisition, or IPO. The conversion price depends on the valuation cap, discount, or interest accrued.

Attorney Weberman can draft precise conversion terms in SAFE/note agreements for your startup, specifying triggers, formulas, and rounding mechanics to avoid ambiguity. He can model cap table outcomes to project dilution, ensuring founders understand impacts before signing. In New York’s litigious environment, clear terms prevent investor disputes, streamlining your future rounds and maintaining investor trust.

Protecting Founder Interests

Attorney Weberman can structure these instruments to protect the interests of your startup founders. For example, SAFEs/notes typically don’t grant voting rights until conversion, but investor-friendly terms can erode founder control. Multiple SAFEs/notes can lead to significant voting dilution in future rounds. Low valuation caps or high discounts increase dilution, reducing founder equity. Stacked SAFEs/notes exacerbate this, especially with pre-money SAFEs.

Startup lawyer Daniel Weberman can structure your SAFEs/notes to protect control ( and manage dilution. He will maintain a lean cap table via software or spreadsheets, tracking SAFEs/notes and modeling your future rounds. Daniel can also draft founder-friendly provisions and ensure compliance with New York’s securities laws, preserving your founders’ leverage in investor negotiations.

Addressing Tax Considerations

SAFEs are treated as equity-like instruments, but their tax status is evolving. The IRS sees SAFEs as deferred equity, with no immediate tax on issuance. If shares are issued at a discount, conversion may trigger capital gains for investors. Your founders face no immediate tax but risk dilution that will affect future gains. Ambiguities in valuation caps or conversion can complicate tax reporting, requiring IRS coordination.

Attorney Weberman can coordinate with tax advisors to structure your SAFEs/notes for optimal tax outcomes, ensuring compliance with IRS rules. He can also clarify disclosures’ tax implications, reduce founder surprises, and align instruments with New York’s tax environment, protecting your startup’s financial runway.

Startup lawyer Daniel Weberman has a tailored and strategic approach to his clients to ensure compliance with state and federal securities laws:

• Funding Needs Assessment: He will understand your startup’s immediate capital requirements and stage of development to recommend appropriate financing tools. For instance, he will perform a capital requirements analysis by assessing burn rate and milestones to understand the urgency of funding.
• Instrument Strategy: Daniel will advise your company on the pros and cons of using SAFEs versus convertible debt for the round. SAFE notes have the advantages of no interest, no maturity date, simple documentation, founder-friendliness, and being widely accepted in NY tech ecosystems. However, the downsides are uncertain tax treatment, limited investor protections, and potential cap table complexity.
• Term Sheet / Note Drafting & Negotiation: Daniel will prepare the financing documents and assist your organization in investor negotiations. For SAFE notes, he’ll use standardized templates, customized with terms like valuation cap, discount rate, MFN clause, and pro rata rights. He will draft promissory notes specifying principal, interest rate, maturity date, valuation cap, and discount rate for convertible notes.
• Compliance Oversight: Daniel will ensure adherence to securities laws and manage required filings. For example, both SAFEs and convertible debt are securities under federal and New York law, requiring compliance with SEC Regulation D, New York Blue Sky laws, and the Martin Act. He will verify investor accreditation status to comply with Reg D exemptions, which are critical in NY’s diverse investor pool, and ensure disclosures meet New York’s strict standards to avoid liability.
• Conversion Assistance: Providing legal support when the instruments convert into equity in a subsequent financing. He will provide legal support when your SAFEs or convertible debt become equity. For instance, Daniel will calculate equity issuance based on valuation cap, discount rate, or MFN terms during an equity financing.