Question 1

Can you explain what I get when I invest?

Accepted Answer

In plain terms, you get a stake in SimpleX Chat that benefits financially from the company’s growth. Legally, you invest via a Wefunder SPV [1] into a YC SAFE [2] that converts to preferred shares in a future qualified priced round. Conversion price is the lower of the new round’s valuation or this round’s cap ($40M for early-bird investors, $45M otherwise), so you are protected whether the next round valuation is lower or higher. The early bird cap is set at 2× the previous round’s valuation...

Question 2

I really liked hearing how you’re thinking about using the investment money and the future plans for generating revenue in ways that don’t rely on traditional advertising or selling user data. I think that’s a really strong aspect of the company. One question I had before inve...

Accepted Answer

We obtained legal advice on server operators responsibilities, as disclosed in form C. This post explains our process to counteract any illegal uses without compromising privacy of the users: https://simplex.chat/blog/20250114-simplex-network-large-groups-privacy-preserving-content-moderation.html What is important, is that SimpleX design that makes it impossible to contact users unless they want to automatically reduces its potential criminal usage - it cannot be used to scam people, as any ...

Question 3

Another two-part question I had is about the company’s long-term philosophy and how that would be protected as the company grows. I strongly value the approach you’ve described toward generating revenue without relying on traditional advertising or selling or monetizing user d...

Accepted Answer

I believe that the only way to build a long term sustainable and profitable business is to focus on customer value, and not on short-term revenue opportunities. With growing transparency of all businesses, thanks to AI as one of the factors, the businesses that focus on anything other than creating value to their customers would likely lose their market dominance.

Question 4

One technical question came to mind I was curious about before investing: I understand that future QSBS eligibility can't be guaranteed, but is the current corporate and SAFE structure potentially compatible with Section 1202 treatment for the shares received upon conversion, ...

Accepted Answer

You are right that QSBS eligibility is subject to various circumstances that change over time, so it will have to be established at the time it matters - whether it is the case now is not important.

Question 5

One other thing I'm curious about is dilution. I didn't see anything in the current SAFE terms specifically addressing anti-dilution protection. If I choose to invest through this SAFE and the company raises additional funding in the future, how should I expect my ownership pe...

Accepted Answer

Dilution is standard - additional capital raised proportionally dilutes the existing stakeholders. SAFEs are partially protected against dilution because they have valuation cap, so in the priced round the conversion would happen at a minimum between SAFE cap and priced round valuation.

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