Funding & Investment
SAFE
Also Known As
Simple Agreement for Future EquitySAFE Note
A SAFE (Simple Agreement for Future Equity) is an investment instrument created by Y Combinator that gives investors the right to receive equity at a future financing event, without being debt.
What is a SAFE?
SAFE was created by Y Combinator in 2013 as a simpler alternative to convertible notes. It's not debt—it's an agreement to receive equity in the future.
SAFE Terms
- Investment Amount: Capital invested
- Valuation Cap: Maximum valuation for conversion
- Discount: Optional discount to next round
- Pro-Rata Rights: Right to maintain ownership
Types of SAFEs
| Type | Terms |
|---|---|
| Cap, no discount | Converts at cap or actual valuation |
| Discount, no cap | Converts at discount to actual |
| Cap and discount | Better of cap or discount |
| MFN (no cap) | Gets terms of next SAFE |
Why SAFEs Are Popular
- Simple, standardized document
- No interest or maturity date
- Lower legal costs
- Fast to close
- Founder-friendly
SAFE Risks for Founders
- Can stack up (too many SAFEs)
- Dilution not clear until conversion
- Some investors prefer priced rounds
Post-Money SAFEs
Newer post-money SAFEs make dilution clearer:
- Cap is post-money (includes the SAFE)
- Easier to calculate ownership
Example Usage
“They raised $750K on post-money SAFEs at an $8M cap.”