Cannabis Safe Financing Document

Simplified fundraising for early-stage cannabis startups

About the Cannabis Safe

The Safe (Simple Agreement for Future Equity) was created by startup accelerator Y Combinator (YC) in 2013, to standardize and streamline early-stage fundraising for startups. Since then, it has been used by almost every YC startup and countless other early-stage startups as a primary fundraising instrument.

A "safe" is a standardized fundraising document, designed to simplify the fundraising process for early-stage startups. The cannabis safe has been customized for cannabis businesses and investors, created in collaboration with top cannabis legal teams to incorporate the regulatory nuances of cannabis businesses. This includes a mechanism to ensure investors and the company can comply with state and local cannabis regulations when and if required (i.e., investor disclosures), and an investor acknowledgment that exempts the company from representing any compliance with certain cannabis laws such as federal law or Section 280E of the tax code.

The goal of the cannabis safe is to simplify the process of investing in an early-stage cannabis business. As a standardized and widely-accepted fundraising document, with only a limited set of variable terms, it can be negotiated and entered into quickly, reducing the time and cost associated with fundraising. This gets needed infusions of capital to startups faster while leaving more money in their pockets at the end of the day.

Close up of indoor cannabis flowers under a netA man checking cannabis plants inside a cannabis cultivation indoor facility

The original YC safe reduced the cost of fundraising and standardized terms with investors, allowing the startup ecosystem to thrive. Founders could focus time and resources on building their business rather than on lawyers and negotiating with investors.

We wanted to create something similar for cannabis entrepreneurs who face the added burdens of strict industry regulations and an ongoing lack of banking and financial services. We saw the shortcomings of pulling existing financing instruments off the shelf for a cannabis company given the regulatory landscape so we set out to create the first standardized, open-source fundraising document customized for California cannabis. We want to provide pathways to get needed capital to cannabis businesses faster and at a fraction of the cost. We want to create a thriving ecosystem for the licensed California cannabis industry, and that starts with access to trusted financing tools and resources.

David Hua
CEO & Co-founder of Meadow, YC15

Created with the approval of Y Combinator, the cannabis safe is an open-source document, which means anyone can use it for free and adapt it for their company's financing. Cannabis startups can take advantage of this open-source document to more confidently and compliantly raise funds while also educating investors that may not be as aware of the regulatory nuances of investing in a cannabis business.

The cannabis safe is intended to be used for investments into corporations and not LLCs; if used with an LLC, cannabis businesses should discuss the implications with their legal and tax advisors.

The cannabis safe may not be suitable for all businesses, investors and financing situations. Founders and investors are encouraged to have their own attorneys review the agreement if they would like to.

The cannabis safe outlines standardized financing terms that can be adapted for many early-stage commercial cannabis businesses. Anyone can download the cannabis safe for free and adapt it for their company. Neither Meadow nor any collaborators have a financial interest in any of these agreements. Meadow does not assume responsibility for any outcome or consequence of using the cannabis safe, and the information provided on this page does not constitute legal advice. If you do need legal advice, check out any of the legal team listed above.

Created in collaboration with:

Cannabis Safe In The News

Forbes logo; 'Forbes' in bold black text

Can Silicon Valley Help Make Marijuana Less White? This Trick For Affordable Capital Might Help

"...For once, a solution for leveling the playing field might be found in Silicon Valley, where a standard practice for raising cheaper capital—vetted and endorsed by a top accelerator—is now available for cannabis companies."

California NORML Logo; 'California' in green above bold 'NORML' in black

The Cannabis Safe: An Open-Source Fundraising Document for Cannabis Businesses

"...Our goal in modifying this document for our community was to reduce the cost of fundraising in an early-stage cannabis company and standardize terms with investors, allowing the startup cannabis ecosystem to thrive."

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