For Investors
What does the Rollup Agreement do?
The Rollup Agreement is designed to reduce the administrative costs of SAFE conversion for you and the company. It allows the company to sign SAFE conversion documents on your behalf during an equity financing round if the SAFE is converting according to its terms.
A Rollup Agreement allows you to retain the economic and information rights of your SAFE investment while eliminating the need to sign off on every company transaction.
What does the Rollup Agreement not do?
This agreement does not change the economic terms of your SAFE investment(s).
How does the Rollup Agreement work?
The Rollup Agreement features a limited power of attorney that authorizes the company to convert the SAFE according to its terms without further signatures from you as the investor.
The Rollup Agreement also provides a voting proxy that allows the company to vote the shares issued to SAFE investors in line with a majority of the company’s investors (typically this would be the lead investors from subsequent rounds).
Why do startups use Rollups?
Startups use Rollups to reduce the administrative costs of managing investments during and after a SAFE conversion. By using a Rollups Agreement, companies can avoid coordinating a large number of investor signatures in the time crunch of a financing closing or other company transaction.
How are Rollups different than RUVs (Roll Up Vehicles)?
Rollups are generally for existing SAFE investments. RUVs are for founders to raise new capital.
| Specs | Rollups | RUVs |
|---|---|---|
| Legal Structure | POA, Proxy, and drag along terms | SPV, Proxy (optional) |
| Use Case | Rollups are generally for existing SAFEs on your cap table. | RUVs are for new rounds where you will be raising a large number of SAFEs, convertible notes, or equity rounds. |
| K-1's | You are still a direct investor, so Rollups do not require K-1s to be issued. You will receive tax reports from the company. | K-1’s are required. |
| KYC Checks | No. Rollups are executed after an investment has already been made. | KYC checks are performed. |
What happens at the time of conversion for SAFE holders?
At the time the SAFE converts, the company will execute the financing docs on your behalf based on the terms of the SAFE, and you will receive copies of the relevant financing documents.
What happens once the SAFE has converted?
When the SAFE converts, you will receive shares subject to the terms of the equity financing agreements just like you would without a Rollup Agreement.
The voting proxy in the Rollups Agreement allows the company to vote the conversion shares consistently with a majority of investor shares, subject to customary limitations.
Typically this means shares will be voted in the same way as shares voted by the lead investors from subsequent financing rounds.
Is this different from investing directly?
After signing the Rollup Agreement, you are still a direct investor in the company and maintain both your economic and informational rights. The voting agreement in this document allows the company to vote the converted shared from the SAFE in a manner consistent with the vote of a majority of preferred shareholders, simplifying the administration of future company transactions.
Do venture funds sign the Rollup Agreement?
Yes. Leading funds and institutional firms have signed the Rollup Agreement.
Do Rollups Impact QSBS?
Executing a Rollup Agreement does not impact QSBS eligibility. There is no transfer of ownership and any QSBS benefits would still apply. Please note that while the IRS has not qualified their position either on either QSBS or SAFEs, some SAFEs may have a clause that outlines that for tax purposes, the SAFE is to be treated as Common Stock. In either case, the Rollup Agreement is designed to not have an impact on this treatment.
Do Rollups and pro rata side letters work together?
Investors still retain rights under pro rata side letters --companies will need to ask investors with these rights if they want to participate and collect funds just like any other investment in a subsequent round.
Can investors terminate the agreement?
The agreement will automatically be terminated if there is a liquidity event, a dissolution or winding up of the Company. You can also terminate the agreement with the company’s written consent.
What happens if the company is sold?
You will participate in the exit along with other investors on the same terms. Your economic rights will not be impacted.
What if investors want to sell their shares prior to a company exit?
The Rollup Agreement does not change the ability to sell your shares. Any transfer restrictions in the SAFE and conversion documents (as well as restricted legends on the conversion shares) will still apply.
How do I sign the Rollup Agreement?
You will receive an email from AngelList inviting you to sign. Follow the steps included in the email and in AngelList. Having trouble? Email startups@angellist.com.
What email should I use to sign the Rollup Agreement?
For individual shareholders, it’s best to use a personal email address. That way, if they have holdings and leave the company, then they can still easily access their holdings without any further changes.
For institutions, such as investment firms, it’s best to use their work email address. That way, investors with work email addresses will be able to view their investment in their fund account, not their personal account.
How can I access my Rollup Agreement after I sign?
Log into your AngelList investor dashboard, view the SAFE, and you will find the executed Rollup Agreement attached. 