

Ask HN: How does a YC Safe protect investors from lifestyle businesses - rdlecler1

I understand that in the vast majority of cases there will be some kind of dissolution, Equity Financing or a liquidity event. But what happens if the business just turns into a lifestyle business? What recourse do investors have under this agreement, especially if there is no interest rate attached? Reading the Safe agreement, investors have no voting rights or rights to dividends so in theory the company could pay out dividends to the common shareholders to perpetuity skipping over any upside a safe holder ought to be entitled to.
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YuriNiyazov
Investors with a portfolio care about huge wins in their portfolio, not modest
liquidity events. It would be irrational for a company to choose to remain a
lifestyle business if the alternative is a huge liquidity event. This implies
that in the scenario you are outlining, the alternatives are either modest
liquidity events or complete dissolutions. A rational investor should spend
his time evaluating deals for big wins, not try to recover modest amounts from
the walking dead.

