SAFE Agreements
The Simple Agreement for Future Equity (SAFE) is the most common instrument for early-stage startup investment. Learn about valuation caps, discounts, MFN provisions, and pro-rata rights.
Learn About SAFEs ->Why Invest in US Startups?
The United States is home to the world's most dynamic startup ecosystem. From Silicon Valley to New York, Miami to Austin, American startups attract more venture capital than any other country. For foreign investors, participating in this ecosystem offers exposure to potentially high-growth companies and cutting-edge innovation.
However, startup investing is fundamentally different from public market investing. There's no liquidity, limited information, and a high failure rate. Most importantly, the legal structure of your investment matters enormously - the wrong terms can leave you with nothing even if the company succeeds.
My Role
I help foreign investors structure their startup investments properly, review SAFE and equity documents, verify accredited investor status, and understand the US legal framework for private investments.
Key Topics for Foreign Startup Investors
Everything you need to know before investing in US startups
Accredited Investor Status
Most startup investments require accredited investor status. Understand the income and net worth requirements, and how foreign investors can qualify.
Check Requirements ->Investment Platforms
AngelList, Republic, Wefunder, and other platforms make startup investing accessible. Compare options available to international investors.
Compare Platforms ->Due Diligence
What to look for before investing. Cap table analysis, founder backgrounds, market validation, and red flags that signal trouble.
Due Diligence Guide ->Tax Implications
QSBS exclusion, capital gains treatment, and cross-border tax considerations for foreign startup investors.
Tax Considerations ->Exit Strategies
IPOs, acquisitions, secondary sales, and what happens to your investment when a startup has a liquidity event.
Understand Exits ->Investment Instruments Compared
Understanding the different ways to invest in startups is crucial. Each instrument has different rights, risks, and conversion mechanics.
| Instrument | What You Get | Conversion | Best For |
|---|---|---|---|
| SAFE (Post-Money) | Right to future equity | Next priced round | Pre-seed, Seed stages |
| Convertible Note | Debt that converts to equity | Next priced round or maturity | Bridge rounds, short timelines |
| Preferred Stock | Actual equity with preferences | N/A - immediate ownership | Series A and later |
| Common Stock | Basic equity ownership | N/A - immediate ownership | Founder shares, employee equity |
| Revenue Share | % of future revenue | Ongoing payments | Cash-flow positive businesses |
Post-Money vs. Pre-Money SAFEs
Since 2018, Y Combinator recommends post-money SAFEs. The key difference: post-money SAFEs give you a clear ownership percentage at conversion, while pre-money SAFEs can be diluted by other SAFEs issued before the priced round. Always confirm which version you're signing.
Can Foreign Investors Participate?
Yes, foreign investors can invest in US startups, but there are important considerations:
Regulatory Requirements
- Accredited Investor Status: Most private placements require this (income or net worth thresholds)
- OFAC Compliance: Investors from sanctioned countries face restrictions
- CFIUS Review: Investments in sensitive industries may require government approval
- KYC/AML: Platforms and startups must verify your identity and source of funds
Practical Considerations
- Wire Transfers: Moving money to US startups requires proper documentation
- Tax Treaties: Your home country's treaty may affect withholding and reporting
- Currency Risk: Investments are in USD; consider exchange rate exposure
- Communication: Time zones and language can affect investor relations
Countries with Restrictions
Investors from Russia, Iran, North Korea, Cuba, and other sanctioned countries face significant barriers. Even partial sanctions can prevent participation. If you're from a country under any US sanctions, consult with me before attempting to invest.
Getting Started: Step by Step
- Verify Accredited Status: Confirm you meet the income ($200K individual / $300K joint) or net worth ($1M+) requirements
- Choose Your Approach: Direct angel investing, syndicates, or platforms like AngelList
- Set Up Payment Method: US bank account or international wire capability
- Complete KYC: Passport, proof of address, and source of funds documentation
- Start Small: Make your first investment at a comfortable size while learning
- Build a Portfolio: Diversify across 15-20+ companies to manage risk
- Be Patient: Expect 7-10 years before seeing returns on most investments
Recommended: Legal Review
Before signing any investment documents, I recommend having an attorney review the terms. SAFE agreements may look standard, but variations in language can significantly affect your rights. I offer document review services specifically for startup investments.
Ready to Invest in US Startups?
I can help you verify accredited investor status, review investment documents, and structure your startup investing strategy.
Sergei Tokmakov, Attorney — California Bar #279869