# Y Combinator Agreement

All right. Now we understand the sAFes and how they are built. We`ll talk about dilution and understand how your cap tables work. All right. So we`re going to go through that process. So let`s start with the creation of our company, which Carolyn talked about from the beginning of the start-up course, I believe, so I hope it won`t be something new for you. Then we`ll talk about what`s going on, if you raise money on SAFE some post-money SAFes, then we`ll talk about what happens when you hire people and start issuing equity to employees. And then the company will do a price tour. And what will happen to the heading table at this point? And now I`m going to let you know. This starts to get into the math nade of the whole case, so you turn your brain and you keep concentrating. All right.

So, the community. So suppose it`s a really simple business, there are two founders, and they share their shares equally between the two. In this example, each founder owns 4.625 million shares. There are therefore a total of 9.25 million shares issued and each founder owns 50%. It`s pretty simple, isn`t it? And so at that point, to own those shares, the founders did the paperwork, they awarded those shares through a restricted share purchase agreement and there is a lease of those shares, as was said previously with Carolyn in the price. All right. So the next thing that`s going to happen is that this company is collecting some money on a post-money safe, and it`s been collected by two investors. So the first investor arrives early enough and they are betting in \$200,000 on a post-money valuation cap of \$4 million. And then a little later, Investor B enters, putting in 800,000 to an \$8 million post-money cap valuation. So if you remember our formulas, the property that the investor has at that time is the amount of money they divide into by the post-money valuation cap that gives them 5% of the business. The same goes for investor B, 800,000 over 8 million, which gives them 10% of the company.

In total, the founders sold 15% of the company at that time. So even if it doesn`t change the actual course chart, because they`re not shares at that time, it`s just a SAFE, it`s just a promise to give shares in the future, if the founders know at this point that they sold 15% of the company. And if they have sold 15% of the business, they can no longer own 100% of the business. Instead of earning 100% of the business between them now, they have been diluted by 15%, which brings them down to 85% of the company. So it`s important to have in your brain if you collect money, because while the heading table, as I say, does not change, the fact that you just sell 15% of the business is an important fact and it`s an important thing to know, because you want to make sure that you don`t sell too much of the business because you know that there are a lot of future fundraisers that are going to happen with and therefore, there will be more dilution in the future. Are we all satisfied with the way we got to that 15%? Yes, the question. The next date in post-money-SAFEs is usually the date on which the start-up cancels a price-action cycle, usually their A-series. Safe standard agreements also provide for other major events, such as the founders who sell the business or close the store. We have a standard agreement for all our investments.

We invest \$1250,000 in a „post-money“ agreement for future capital, and we enter into an agreement with the company and the founders that defines certain specific YC guidelines and rights, including a right to participate in future corporate financing cycles (the „YC agreement“). A „SAFE“ is an agreement between an investor and an entity that grants the investor rights to the company`s future equity, which are similar to a share warrant, unless a certain price per share is set at the time of the initial investment.