kirsty

It depends on specific circumstances. If the IP in the foreign company is truly unrelated, then there are circumstances where it could make sense to just start a new company in the US. If the US company is going to use the IP, then there are lots of potential solutions and structures.

Often we see founders with foreign companies do a share exchange so the shares in the foreign company are exchanged for shares in the US company and the foreign company then becomes a subsidiary of the US company. Particularly in the case where the founders plan to go back to their home country or to hire / operate in that country.

If you get accepted into YC and have already incorporated a foreign company, then we can help you figure out what the best solution would be in your situation.

If you aren't already incorporated and you don't have to immediately, then probably best to wait to find out if you're accepted into YC before incorporating anywhere other than the US.

Agreed that 83b elections are crucial - there is very little a company can do if the form does not get filed within the 30 day window. The consequences of not filing the election can be significant for both the company and the employee.

Clerky has the 83b election form (where necessary) as part of their Hiring package so that when the employee is allocated equity and signs the documents, it is automatically completed. However it is up to the employee to mail it in since it has to be sent via mail and can't be sent electronically. The company should make sure they are chasing the employee to do this and to get a copy of the election for the company's records.

Thanks Geoff. I'm happy to answer questions on this topic. However some things are company and situation specific so can't be generalized. Also IANAL!

Safes and convertible note are both types of Convertible Securities. Ie they each convert into shares at a future date, usually at a priced round.

A convertible note is structured as debt - there is interest earned until it converts and a maturity date. There are also terms about repaying the debt.

A safe is not debt - it does not have a maturity date and interest does not accrue.

So referring to a "Safe Note" is non-sensical because there is no such thing.

Safes (and other convertible securities) convert at the cap, assuming the round valuation is higher than the cap. Where there are safes with multiple caps there are a number of methods that the lawyers use so that investors receive the correct number of shares, while solving for your point about the excess liquidation preferences.

The simplest one is that there are multiple sub classes of preferred stock ("shadow series") - eg for a Series A, there are Series A-1, Series A-2 shares that represent each cap. These classes each have their own liquidation preferences matched to the dollars put in originally. The YC-standard safe also contemplates this by referring to "safe preferred shares".

Another option is that the "extra" shares that the converting safeholders receive as a result of the difference between the conversion price and round price are given as common shares (which have no liquidation preference).