Investors can earn a return if a trigger event occurs at a certain price threshold. Although trigger events sometimes happen earlier, many don’t occur for 4-6 years after the initial investment, and some may take even longer.
Risk note: Startup investing is risky, so there’s no guarantee of a return on this kind of investment.
In general, you can only sell a Crowd SAFE after one year from the purchase date and only if you find a buyer, which might not be easy to do.
Equity Portal plans to work towards providing additional secondary market liquidity of Crowd SAFEs and other securities in the future.
In the event of future equity financing rounds, the company may choose to either “roll-over” Crowd SAFE holders and continue the terms of the Crowd SAFE, or convert the investment into shadow shares. If converted into shadow shares, the Crowd SAFE will secure the financial terms of that financing round to ensure Crowd SAFE investors receive the same benefit if there is an eventual exit event.
Shadow shares are shares that mirror the type of security issued in the subsequent financing, only they don’t grant investors voting or information rights. Companies may choose to convert Crowd SAFE investments to shadow shares at a subsequent equity financing round.