What implications does the increased popularity of SAFEs have on QSBS eligibility and what strategies can investors use to ensure QSBS eligibility?

I haven't gone too much into the details of SAFEs, but it's effectively a form of convertible. The biggest thing is you want to make sure to buy the equity, to own the actual equity -- one of the requirements is to actually own the shares. You can't just have options or the ability to convert the debt into equity. You actually have to own it.

To your question, I think the big thing you should focus on from an investor standpoint is: when you make an investment -- an angel investment or a VC-type investment -- in a startup, that company should be working with you in order to determine whether the stock is QSBS or not. It's something that comes up at Secfi when we do equity raises. Our investors are going to be asking us questions like, “Can this be QSBS? Can you give me some more info?” You should work with the company. You take it at the individual level, so the company isn't really technically at risk by saying it is or it isn't. It's up to you as the investor and the individual who’s ultimately taking the tax benefit to ensure that you have proof that it is QSBS when you acquire the stock.

Just to drill down on that: when you make an investment, talk to the company. Ask them for all the proof, get a copy of the balance sheet, and go through the QSBS checklist asking for all the material to document that. If the IRS comes calling five or ten years down the road when you have a massive exit and you take the QSBS, you need to be able to prove that it is actually QSBS.