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The CARE Note
The Community Agreement for Revenue Earnings
A revenue-based debt instrument that solves the SAFE problem for cash-flow businesses. Mathematically compliant with usury law. Characterized as debt by the IRS.
Nine pages. Plain English.
Why I Built This
The SAFE was structurally wrong.
I was helping a founder think through a Reg CF raise and I realized the instrument we were defaulting to, a SAFE, was structurally wrong for the business.
SAFEs are designed for venture-backed companies pursuing equity exits. The “future equity” only matters if there’s a future priced round or sale. For a consumer business, a service company, a community-anchored operation, or anything else whose path is cash flow rather than exit, the SAFE becomes a problem the founder can’t solve. The investor wants their money. The founder doesn’t know how to convert a SAFE without selling or raising.
So I designed a different instrument.
WHAT THE CARE NOTE IS
A revenue-based debt instrument.
The CARE Note (Community Agreement for Revenue Earnings) is a revenue-based debt instrument. The investor lends the company capital. The company repays the investor as a defined percentage of revenue, up to an agreed multiple of the original investment, over a defined maturity period.
01
A nominal interest rate sufficient to satisfy IRS debt characterization
02
Milestone thresholds that tie the revenue-sharing schedule to the company’s actual growth, satisfying the legal precedent that exempts the structure from usury law
03
A balloon repayment provision that creates an outer maturity date, completing the IRS debt characterization
04
A clear default trigger that gives the investor recourse without forcing equity conversion
The legal defense is documented in full. Precedent is cited. The math holds.
What’s In the Template
Nine pages. Plain English.
It is intentionally the same length as the Wefunder revenue-sharing note. Same length, much clearer language, an instrument design that survives both usury and IRS scrutiny where the existing template arguably does not.
Page 1 & 9
Cover page and signature page
Page 2
Terms section, front and center
Page 3 – 4
Definitions
Page 5
Revenue-sharing schedule with milestone formula
Page 6
Default and remedy provisions
HOW TO USE IT
Four people, one instrument.
If you are a founder
If you are a founder, this is the instrument to consider after you’ve raised from friends and family. You want to raise patient capital, you don't want to give up ownership and you want investors who are aligned with your business success rather than your exit.
If you are an investor
This is the instrument that lets you participate in cash flow returns from real business operations without taking equity risk or relying on an exit event.
If you are a platform
This is a new boilerplate to consider adopting. Wefunder is reviewing it. Other platforms are welcome to.
If you are an attorney
The legal defense document is meant to make your job faster. Cite the precedent, verify the math, and let your client deploy the instrument with confidence.
FAQs
Questions, answered plainly.
A SAFE is designed for venture-backed companies on a path to a priced equity round or an exit. The investor’s return doesn’t come from business performance. It comes from finding a buyer who believes the performance will continue. For a business that generates revenue but isn’t pursuing an exit, the SAFE never converts cleanly. The investor is stuck holding paper, and the founder is stuck owing something they don’t know how to satisfy.
The CARE Note matches the cash-flow shape of the business. The founder pays the investor back from revenue. The investor gets a defined multiple. Everyone knows what success looks like, and everyone knows what default looks like.
Yes. Usury law caps the implied annual interest rate on debt instruments. A naive revenue-share with a high multiple can violate usury when reverse-engineered to an annualized rate. The CARE Note avoids this by introducing milestone thresholds tied to actual revenue growth, which legal precedent treats as exempting the instrument from usury treatment because it makes the investor a participant in business growth rather than a creditor charging a fixed return. The legal defense document walks through the precedent in detail.
Yes. The IRS evaluates debt characterization against a set of conditions including the presence of a nominal interest rate, an outer maturity date, and a default trigger. The CARE Note is designed to satisfy all three. This matters because debt and equity have different tax treatments for both the company and the investor, and you want to know which one you’re holding.
Wefunder’s standard revenue-sharing note doesn’t include a nominal interest rate, doesn’t include a balloon maturity, and doesn’t include a clear default provision. As a result, it’s harder to characterize as debt for IRS purposes, and the milestone-threshold structure that exempts it from usury isn’t always present. The CARE Note adds those three elements while keeping the simplicity that makes the revenue-sharing concept work in the first place.
Yes. The template is free to use. You’ll want an attorney to adapt it to your state, your specific terms, and your platform. The legal defense document is designed to make that conversation faster and cheaper for your attorney.
That’s the open design question. Common ranges are 1.5x to 5x of the original principal, depending on the company’s growth rate, the patient period, and the risk profile. The white paper walks through how to think about it. The advisory engagement at Stakeholder Enterprise can help you model it. Click here to View and Try My Free Modeling Tool →
No. This page is informational. The CARE Note is an instrument design, not an investment. Any specific use of the instrument requires legal review, registration where applicable, and ordinary diligence. Investing carries the risk of financial loss.
The instrument is being submitted to Wefunder as a new boilerplate. The first live deployment will be the Stakeholder Enterprise Reg CF raise, which is using the CARE Note as the investment instrument. That deployment will be the public test of the structure.
A Note on Naming
Care is the orientation.
CARE stands for Community Agreement for Revenue Earnings.
The name is deliberate. The instrument is structured as an agreement between the community of investors and the operating business, not as a one-sided extractive claim. The earnings flow back into the community via the cash-flow schedule. Care is the orientation.
It is also the kind of instrument I wish had existed in 2008.