I have just discussed a little bit about using Simple Agreement for Future Equity (“SAFE”) in Hong Kong in a chat group of startups.
This led me to another crazy idea: what if in a group of (eg. 10) startups, each startup invests US$1K to all the other 9 startups? so each startup will make a total investment of US$9K and at the same time receive US$9K from 9 investors.
Uncapped SAFE with a moderate discount
We are startups. Let’s minimize legal cost. Use SAFE (of course!). To avoid endless discussion of valuation cap, make it uncapped with a moderate discount, how about 20%?
10 startups, 9 investors, 45 connections
So, without actually spending or receiving new money, each startup in this group will have 9 strategic investors.
According to Metcalfe’s Law, we know that a group of 10 startups will have 45 connections. What if we make it 20 startups instead? 190 connections.
What if we make it 30 startups? There will be 435 connections.
Let’s be aggressive, make it 30 startups. What if each of them can get 5 new investors from family and friends? There will be 150 investors each invests directly and indirectly in a portfolio of 30 startups.
What if each of them on average has 3 team members? There will be 90 people. This is a portfolio of 30 companies, 90 people, 150 external investors with mutual interest.
With this group of startups, maybe we can ask for a discount from business centres, coworking spaces, lawyers, accountants, restaurants… … wait, why don’t we also include business centres, coworking spaces, lawyers, accountants, restaurants in this portfolio as well?