The Community Safe was designed to be very similar in form and function to the YC Safe (post with a valuation cap), but with modifications to leverage the powers of blockchain technologies, DeFi, and decentralization. Like the YC Safe, the Community Safe provides investors with guaranteed rights in the issuer’s future equity, including protections against down-rounds and dilution based on the terms of conversion at the next qualifying ‘equity financing event.’ Investors receive digital assets when investing in a Community Safe representing their interest in the organization. Like a YC Safe, these rights in future equity convert upon a qualifying equity financing conversion event like a Series A financing round.
Organizations determine a conversion rate per token and valuation cap at the start of their offering, resulting in predictable ownership percentages and avoiding the unexpected dilution that can occur from using different valuation caps.
Organizations can still issue their equity at different prices by simply changing the price of the digital assets issued while maintaining the same predictable underlying rights and terms. Price discovery can also be automated by utilizing a linear bonding curve based on demand.
Community Safe interests can also be issued with or without voting and management rights. Economic equity without voting rights can make it easier for organizations to manage larger numbers of stakeholders while still providing the financial incentives and benefits inherent with stock and equity.
By issuing digital assets representing the rights purchased by investors, organizations and stakeholders alike have increased transparency including the flexibility, freedoms, and superpowers of digital asset tokens.