The Term Sheet Inside a HK Accelerator: SAFE vs Equity

HK accelerator terms fall into two broad categories: equity programmes (the accelerator takes a direct equity stake in your company at a fixed valuation) and SAFE programmes (the accelerator’s investment converts into equity at a future priced round, typically with a valuation cap and/or discount). Equity programmes provide clarity — you know exactly what percentage the accelerator owns — but can create tax complications for founders if the equity is issued at a low valuation. SAFEs avoid immediate equity issuance and associated tax issues but introduce uncertainty about the eventual dilution. The trend among HK accelerators is towards SAFEs with valuation caps, mirroring the US market standard. The term sheet elements to scrutinise most carefully: the valuation cap (lower caps mean higher potential dilution), the discount rate on future conversion, and any pro-rata rights that give the accelerator the option to invest in future rounds.