Why take a “SAFE” out on Glafabra?

Drs.Jeffrey Medin and Chris Hopkins, co-founders of Glafabra just purchased some SAFEs from Glafabra - Why would they do that?

Executive summary:

$2 M seed funding needed to advance Fabry therapy to the clinic.
SAFE (Simple Agreement for Future Equity collects the seed investments.
SAFE adopters receive a 20% discount and a $17M valuation cap.
Series-A raise in 2026 (est. $50M) will imply a pre-money valuation of $150 M.
Exit scenario modeling forecasts a $5B sale of the company by 2030.
175x multiple for SAFE investors.

Glafabra Therapeutics is requesting seed funding from early investors to help us move forward in getting our lead asset in Fabry disease towards IND status so it can be FDA-cleared for clinical applications. This deploy of funds will help us obtain the critical feedback from the FDA needed to put in a successful IND application. This feedback from the FDA will allow us to generate essential data and documents so that we can file our Investigational New Drug (IND) application with the FDA in the middle of 2026 next year.

What is a SAFE?

A Simple Agreement for Future Equity (SAFE) is a common way to invest in start-ups. Y-Combinator introduced them in 2013, and they are widely used as a more straightforward alternative to convertible notes. SAFEs offer simplicity and customizable terms that allow us to focus on curing diseases rather than getting bogged down in funding negotiations and expensive valuations. Early stage “fair market value” (FMV) can be subjective because many of the traditional valuation measures don’t apply (top line revenue, equipment replacement costs, discounted cash flows (DCF) valuations, etc.). Other valuation methods, such as market comparisons, aren’t reliable since we’re developing state-of-the-art treatments, so it is difficult to find comparisons. Investing now through a SAFE provides an equity position in the subsequent priced round, where an independent appraiser will conduct a fair market value (FMV) valuation (the "409A valuation") and the value of the company will be more accurately derived.

Early SAFE Adopters Often Receive Better Deals (Sweeteners)

A company often creates benefits in the SAFE deal to make the deal attractive. One frequently used benefit tool is a discount. It says that you will get a price-per-share at a lower value (the discount rate) than the price-per-share for the other investors coming in after the appraisal on the priced round. This makes sense - an early investor is taking on more risk, and they should get more reward. Another tool to reward safe holders is to use a valuation cap. This is the maximum valuation of the company at which the SAFE converts into equity. Low valuation caps are often well below the FMV in the priced round. They create a delightful deal for SAFE holders when they are well below that future valuation.

Here’s a basic example of how SAFE conversions with a discount and valuation cap can work.

Let's say:

A startup raises $500,000 from an investor through a SAFE agreement.
The SAFE agreement includes:
A valuation cap of $10 million.
A 20% discount rate.
Later, the startup raises a Series A round at a $20 million valuation, then, if the total shares is 10 million (old + new investors), then the price per share price for the new investors is $2 per share.

Scenario 1: Valuation Cap Applies

The SAFE investor would convert their investment based on the valuation cap of $10 million.
The SAFE conversion price would be calculated as: $10 million valuation / (total shares outstanding + shares issued in the Series A round).
Let's assume there were 8 million shares outstanding before the Series A round and the Series A round issues 2 million shares. The SAFE conversion price would be $10 million / (8 million + 2 million) = $1 per share.
The SAFE investor would receive shares at $1 per share, effectively getting more shares for their investment than the Series A investors who paid $2 per share.

Scenario 2: Discount Rate Applies

The SAFE investor would convert their investment based on the 20% discount rate.
The SAFE conversion price would be $2 per share (Series A price) * (1 - 0.20) = $1.60 per share.
The SAFE investor would receive shares at $1.60 per share, which is less than Scenario 1’s prior $1 per share.

In this example, the investor would choose the valuation cap, because it results in a lower conversion price per share ($1 vs. $1.60).

Changing up the cap:

The comparison of $16 M cap-price per share would be equal ($1.60 vs $1.60).
$2 M cap - price per share comparison would be very asymmetric ($0.20 vs $1.60).

The bottom line is that if the cap is lower than what happens in the downstream-priced deal, the better the multiple will be for the SAFE holder.

Glafabra’s SAFE Sweetener

Glafabra is raising $2 M in this SAFE and offering a 20% discount at a $17 M valuation cap. However, as a bonus for very early adopters, up to the first $500,000 raised, they will benefit from a $15 M valuation cap; then the remaining $1,500,000 raised will be at the $17 M cap.

Glafabra’s Valuation

According to Carta, the software used by about 80% of biotech startups, the average pre-seed SAFE for a biotech company is issued at a 20% discount and a valuation cap between $5-15 M. However, because Glafabra is a cell therapy company, the pathway to market is more expensive than that of a small molecule therapeutics company. This constraint typically results in higher valuations. Additionally, our therapy for Fabry disease has already been shown to be successful in a pilot clinical trial in Canada. This “de-risks” the technology. Glafabra is closer to commercializing its therapy, thus raising its value. We expect our priced round to result in a high valuation.

How much is a Cell and Gene therapy company worth at its first priced round?

Recent data from the American Society of Gene and Cell Therapies (ASGCT) show Series-A valuations of early-stage gene and cell therapy companies:

From the market comparison above, we can see that the industry standard raise for a cell therapy company is near $50 M. Assuming the new investors owns 25% after the deal (the “post money” value), the valuation before the investment is $150 M (the “pre money” value). After the $50 M investment, the company's value is $200 M (the “post money” value). Applied to Glafabra, one can expect a pre-money valuation to be near $150 million in mid to late 2026. For SAFE investors at the $17 M cap, the benefit of early adoption with purchase of a SAFE is close to a 7x efficiency in their price-per-share at that valuation.

Glafabra’s is predicting a $5B Exit in 2030

Similar companies have sold to larger pharmaceutical or therapeutics companies for between $1M to $10B (Posieda, Kate, and Kite therapeutics companies). The success of Glafabra’s Fabry asset is poised to displace significant revenue from incumbents (Sanofi and Takeda, which are making yearly income of $1B and $500M from Fabry enzyme replacement therapies). By 2030, we expect to have one therapy demonstrated for efficacy with phase II clinical trial data. In addition, two therapies (Pompe and Gaucher) have entered clinical trials for their respective indications, thus validating that Glafabra’s platform technology can be applied to many disease targets. Compared to current standards of care that use enzyme replacement therapy, Glafabra’s therapies are superior because the treatments will last for years and reach more tissues. We fully expect that when we are in the market, we will take a significant market share from the incumbents.

Here’s what an estimated exit scenario could look like,

Using price per share as a metric, we see that the SAFEs are getting a 175x multiple in their price-per-share value at exit. Note that italic values are estimated, and changes in the exact size of the raises and valuations have reverberations. However, the general principle is likely to remain—investing $1000 with a SAFE would likely be close to $175,000 cash back at exit five years from now.

In summary, at the time of the priced round, the SAFEs essentially go into a round at a $17 M pre-money valuation round (“Year 1”). They immediately convert at nearly 7x share value in the priced round (“Year 2”). In essence, we will use the first year to collect the SAFE investments, and then, in the second year, Glafabra will get the commitments for the priced round. We plan to exit in 2030 with a company valuation of $5 B.