Meadow, a Y Combinator startup building software for California dispensaries, has launched an open-source fundraising document geared toward streamlining early-stage financing for cannabis businesses.
The SAFE, of Simple Agreement for Future eEquity, is a standardized fundraising document that allows founders and investors to negotiate and enter into a financing agreement quickly, reducing the time and cost associated with fundraising.
It was first created by startup accelerator Y Combinator in 2013 and has been used by thousands of companies since. In collaboration with California legal teams, Meadow adapted Y Combinator’s original SAFE for the nuances of legal cannabis.
The tool has been customized for cannabis businesses and investors to address compliance with commercial cannabis investments. It takes into account the regulatory nuances of the legal cannabis industry.
The document features a mechanism that ensures investors and companies comply with state and local cannabis regulations, when and if required, and includes an investor acknowledgment that exempts the company from representing any compliance with certain cannabis laws such as federal law or Section 280E of the U.S. tax code.
“We are aware of the challenges start-ups face when fundraising, and in cannabis those challenges are even more pronounced with strict industry regulations and a lack of banking and financial services. We wanted to help. When fundraising ourselves, we used YC’s safe and it allowed us to leverage simple, standard, balanced financing terms so we could fundraise quickly and at a fraction of the cost,” said Meadow CEO and co-founder David Hua. “We saw the shortcomings of using the original safe for cannabis given the complex regulatory landscape, so we customized it for commercial cannabis companies with the help of California legal teams."