Jordan Denning
6 February 2025
Startups in the sports sector face unique challenges when raising capital. Whether it’s sports technology, media, or apparel, securing funding is crucial for growth. One increasingly popular method of funding is the SAFE (Simple Agreement for Future Equity).
Introduced by Y Combinator in 2013, SAFEs have transformed the way startups across industries, including sports, raise capital. But what exactly are SAFEs, and how do they benefit sports startups? Let’s explore the key concepts and examine how SAFEs apply specifically to the sports industry.
A SAFE is an agreement where a startup receives funding in exchange for the right to provide equity at a future date. Unlike traditional equity deals, SAFEs don’t grant investors ownership immediately. Instead, the investment converts into shares during a specified event, such as an equity financing round.
For sports startups, this model is appealing due to its simplicity and speed, especially when compared to more complex funding instruments like convertible notes. As a result, sports companies looking to scale quickly can use SAFEs to attract investors without complicating the process.
When it comes to choosing between pre-money and post-money SAFEs, startups in the sports sector need to consider the impact on ownership and valuation. The sports industry can be volatile, with seasons, sponsorships, and events affecting financial stability. Therefore, understanding these key differences is crucial.
Transparency is crucial for sports startups, where growth can often be unpredictable. Post-money SAFEs have gained popularity in the sports sector because they offer clarity about ownership and dilution. By accounting for all SAFEs in the ownership calculation, these agreements allow founders to plan more effectively, which is particularly valuable in high-growth industries like sports.
For sports startups, post-money SAFEs help avoid unexpected dilution, which could otherwise impact control over the business. This clarity also simplifies investor discussions, as everyone has a clear understanding of the company’s valuation and potential.
In addition to the standard pre-money and post-money SAFEs, sports startups can explore several variations designed to meet specific needs:
Preparation is essential to ensure a smooth SAFE financing process. Here are key steps sports startups should follow to prepare effectively:
While SAFEs offer simplicity and speed, they aren’t the right choice for every startup. Some investors may prefer priced rounds, which provide additional rights such as board seats or veto powers. Moreover, SAFEs carry the risk that they may never convert into equity if the startup doesn’t raise another round or get acquired.
However, for sports startups focused on rapid growth and scaling, SAFEs can be a valuable tool for securing funding without complicating the process.
SAFEs have revolutionised the fundraising process by offering startups a straightforward way to secure capital. For sports startups, understanding the difference between pre-money and post-money SAFEs, and leveraging tailored variations, can help founders make informed decisions. With the right preparation and legal guidance, sports startups can use SAFEs effectively to fund their growth and succeed in a competitive industry.
At 360 Business Law, Jordan Denning, the Regional Director of the US, brings valuable expertise to help sports startups expand into the US market. With a deep understanding of intellectual property, corporate law, and compliance, Jordan and our team can guide your sports business through the complexities of US market entry. Tap into our global resources, with over 650 lawyers across the US and internationally, and benefit from our cost-effective and flexible fee structures. Let us help you establish a strong presence in the US market with tailored legal solutions designed for the unique challenges of sports startups
