Angel investing with AI: review SAFE in 1 minute and pay lawyers 70% less for deal support
After selling my startup to Qualcomm in 2022, I became an angel investor.
Today, in addition to developing my 2 companies, I invest in 1-2 startups quarterly and have realized how vital decision-making speed is in this field.
I often lost great deals due to legal delays (and, in the process, substantial money, as legal support costs $1,500 per hour).
I usually use YC SAFE for investing. Generally, the work with the contract follows the next scheme:
- I receive a customized SAFE note from the startup and send it for review to the lawyer.
- The lawyer reviews the document and returns it to me with comments after 4-5 days (lawyers are very busy people ;=).
- With these comments, I go to the startup, and when we reach an agreement on the lawyer’s remarks, I send the revised document back to the lawyer.
- After a few more days of waiting for the lawyer’s feedback, if he has additional comments, the whole process repeats.
There can be several iterations, so the agreement could take 2-3 weeks to complete. In the meantime, another investor intercepted the deal, leaving me without a stake in an up-and-coming company.
I still had to pay for legal services, which could cost me up to $10,000. Sometimes, my lawyer’s expenses equaled a third of the investment itself!
How BestAgreement.AI saves time and money for all parties involved in the agreement
Recently, I successfully concluded a deal with a startup, the name of which I cannot disclose – I will only say that I have been familiar with the team and the company for 4 years, and we have been actively collaborating for the past year. So when I was offered to join as an investor, I happily accepted.
This time, I did not involve a lawyer until the last moment—his participation was only necessary at the final stage. For the analysis of the SAFE, I used the AI tool BestAgreement.AI. As a result, it took me only three days from the start of negotiations to the signing of the agreement:
- I received a customized SAFE note from the startup and uploaded it to BestAgreement.AI.
- The tool analyzed the document in a matter of minutes and generated analytics – it found 12 red flags in the document, two of which were quite significant:
- The shares were converted into common shares instead of preferred ones.
- Certain conditions during liquidation differed from the YC SAFE template.
- I sent this report to the startup. They corrected the disputed points and returned the document to me.
- BestAgreement.AI compared the previous and corrected versions and found no additional red flags.
- I sent the revised version to the lawyer, who spent only 20 minutes proofreading and gave the go-ahead for signing.
- We signed the agreement.
Conclusions
According to rough estimates based on my experience in angel investing, BestAgreement.AI has saved a significant amount of resources for all parties involved:
- Both the startup team and I saved around two weeks on communications,
- the lawyer saved about two hours on proofreading the SAFE (however, he earned less $$$ ;=) )
- while I saved about $2,000 for legal expenses.
It is important to note that although AI already demonstrates good results in proofreading documents, one should not rely solely on algorithms in such a responsible field.
BestAgreement.AI can handle the routine part of the work, but contracts should be submitted to lawyers for final proofreading before signing.
No matter how advanced an AI tool is, it cannot fully replace a real lawyer…. For now %=)
However, it can already significantly simplify his work, as well as that of his clients.
I believe that in the near future, all stakeholders in angel investing, from startups to lawyers, will appreciate the benefits that AI offers them and will integrate tools like BestAgreement.AI into their work to enhance efficiency, eliminate errors caused by human factors, and expedite business processes.
Best regards,
12New.AI / BestAgreement.ai
CEO & Founder