How is XX and a custodian better than the Crowd SAFE?
The Crowd SAFE and most other crowdfunding securities used in Regulation Crowdfunding from 2016-2019 are worse for both founders and investors then using XX.
From the standpoint of founders, the Crowd SAFE is not one line on your cap table:
- With a Crowd SAFE, you could choose to aggregate all investors in one line on Carta. However, you are in charge of keeping track of this spreadsheet of who your investors are. That spreadsheet can be called a cap table. With XX Investments, as a SEC-registered Transfer Agent and custodian, XX Investments simplifies the cap table and manages the record of beneficial owners.
- With a Crowd SAFE, all of your investors - even if they have not converted their SAFE to own equity - still count towards the 12(g) threshold. This means if you have more than 500 unaccredited investors and more than $25 million in assets, you are subject to SEC public company disclosure and reporting obligations. With XX, - as with a broker-dealer that hold securities in “street name” – XX Investments will hold Wefunder investors’ securities in “street name” and will be your only record owner for the purposes of 12(g).
- With a Crowd SAFE, you are only postponing the problem of getting signatures from every single investor. One day, you might want to take an acquisition offer. The lawyers - in order to prevent your investors suing you for of a breach of fiduciary duty - will ask you to get a signature from all of your SAFE-holders, even if they don't have equity. With XX, you only need one signature.
- With a Crowd SAFE, there is no concept of a Lead Investor who is financially incentivized to help you. With XX , there is a Lead Investor - who you choose - who is incentivized to help your company succeed, along with other XX mentors who you can book office hours with.
- With a Crowd SAFE, you will raise less money, because experienced and larger-dollar investors will not accept the Crowd SAFE terms. With XX, you can use an investment contract that professional investors use - such as the Y Combinator SAFE.