YCombinator shows how to be “Safe”

Santiago, Chile

I just returned from a two week vacation in Chile where I met with a number of local entrepreneurs, investors and law firms (you are probably asking what kind of vacation that was….crazy lawyers like me actually relax by meeting startups, investors and other crazy lawyers and talking shop).

What struck me about this trip is how quickly information flows in this digital age and how places like Silicon Valley and Latin America grow increasingly inter-connected.
This was illustrated by a mundane form of legal documentation for startup financings that was announced by Y Combinator in early December named Safe.

Safe, or Simple Agreement for Future Equity, represents an evolution by the Y Combinator team of the now widely used convertible notes that many startups issue to raise early-stage financing. Convertible notes, which became popular several years ago as an alternative to equity financings, have a number of advantages (cheaper and faster than preferred stock financings and can avoid setting a valuation on a startup) but also a number of disadvantages (maturity date, interest) that the YC post describes well.

What was striking about my trip is that Safe was just recently announced in Silicon Valley and has barely begun to make a splash in the legal and financing market here (although I do expect the Safe documents to gain rapid adoption in Silicon Valley this year and personally like the documents). However, when meeting with investors and lawyers in Santiago, Chile, I was consistently surprised to learn that they were aware of the Safe documents, had researched and formed their own opinions about them, and in a few cases, the investors were preparing to invest real $$$ using Safe documents within a few weeks. Word travels fast!

San Francisco, CA
Lima, Perú

This inter-connectedness is what gets me excited about the future potential of Latin America’s startup and venture community. Information today flows at a velocity hardly imaginable 20 years ago through the proliferation of social media and traditional media sites, blogs, email, word of mouth, etc. People travel between Silicon Valley and LatAm at growing rates – from short term “geek camp” delegations and investor pitch trips to much longer term relocations of entrepreneurs (often with their families) from places like Mexico City and Bogota to San Francisco and Palo Alto. Startup pitch decks get widely shared from Lima to SoMa, and Silicon Valley and NYC venture firms make more co-investments with best of breed LatAm venture firms in fast moving companies founded in places like Sao Paulo and Buenos Aires. All of this builds stronger ties between Silicon Valley and Latin America and helps open doors to capital, customers and talent for promising entrepreneurs from Latin America. Much remains to be done (more exits, more follow-on capital, more non-stop flights, etc.) – that is the subject of another article. But the growing connectivity, and proliferating tools that help drive down the costs of starting a new venture, bode well for the future of Latin American entrepreneurship.

If you have any questions about the Safe documents, or Chile, or Latin American entrepreneurship and venture capital in general, send them my way and I would be happy to start a dialogue!

Daniel Green is a shareholder at the Silicon Valley office of Greenberg Traurig and contributes to Latam Entrepreneurs as a guest author.

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