Fact-checked by Grok 2 weeks ago

Simple agreement for future equity

A simple agreement for future equity (SAFE) is a financing instrument used by early-stage startups to raise capital from investors in exchange for the right to receive equity in a future priced financing round, without immediately issuing shares or creating debt obligations.^[1] Introduced by Y Combinator in late 2013 as an alternative to convertible notes, the SAFE simplifies seed-stage funding by eliminating interest rates, maturity dates, and repayment requirements that characterize traditional debt instruments.^[1] Unlike priced equity rounds, which require setting a company valuation upfront, a SAFE defers valuation until a later equity financing event, typically converting into preferred stock at a discount or valuation cap negotiated at the time of investment.^[1] The SAFE was initially released in a "pre-money" version in 2013, designed for smaller, pre-priced rounds common among startups at that time.^[1] By 2018, as seed rounds grew larger and more complex, Y Combinator updated it to a "post-money" SAFE, which calculates investor ownership based on the valuation after all SAFEs are invested but before the priced round, providing greater transparency on dilution for both founders and investors.^[1] Key features include its brevity—often a single four-page document—and flexibility, allowing startups to close investments quickly with individual investors without extensive legal negotiations beyond terms like the valuation cap or discount rate.^[1] Widely adopted, SAFEs have been used by nearly all Y Combinator-funded companies and by countless non-YC startups for seed financing, converting automatically upon triggers such as a qualified equity financing round, liquidity event, or dissolution.^[1] This instrument offers advantages in cost savings and speed, as it reduces legal fees compared to drafting convertible notes or conducting full equity rounds, while avoiding the complexities of debt covenants.^[1] Official templates are available from Y Combinator, including post-money variants with or without discounts, and adaptations for non-U.S. jurisdictions like Canada, the Cayman Islands, and Singapore.^[1] Despite its simplicity, users are advised to consult legal counsel to ensure compliance with applicable securities laws.^[1]

Introduction

Definition

A Simple Agreement for Future Equity (SAFE) is a contractual financing instrument whereby an investor provides capital to a startup company in exchange for the right to receive equity at a future date, typically upon the occurrence of a specified triggering event such as a priced equity financing round, without the immediate issuance of shares.^[1] This agreement is designed as a streamlined, concise document, typically around five pages long, that facilitates early-stage funding by deferring the determination of the company's valuation and the investor's ownership percentage until a later milestone.^[1] Unlike traditional debt instruments such as convertible notes, a SAFE explicitly does not constitute a loan and therefore lacks features like interest accrual, maturity dates, or mandatory repayment obligations, which eliminates the pressure of debt servicing on the startup during its formative stages.^[1] Instead, it functions as a non-dilutive funding mechanism until conversion, preserving the company's cash flow for growth initiatives.^[2] At its core, a SAFE operates as a warrant-like instrument that grants the investor a prospective claim on the company's equity, commonly employed in seed-stage investments to bridge the gap between initial funding needs and a formal valuation event.^[1] Conversion occurs automatically upon trigger events outlined in the agreement, ensuring the investor receives shares on terms reflective of the company's progress at that time.^[3]

Purpose and use cases

The primary purpose of a Simple Agreement for Future Equity (SAFE) is to allow early-stage startups to raise capital efficiently by deferring the negotiation of a current company valuation until a later financing round, when the business typically has greater traction and clearer metrics for assessment.^[1]^[4] This approach enables founders to secure funding without the complexities and time delays associated with traditional priced equity rounds, focusing instead on product development and growth.^[2] SAFEs are particularly ideal for pre-seed and seed-stage funding in technology startups, where uncertainty around valuation is high, and they are commonly used in angel investments and accelerator programs such as Y Combinator, which pioneered the instrument in 2013.^[1]^[5] Beyond the U.S., SAFEs have been adapted for use by non-U.S. entities, including in Europe and the UK, with modifications to align with local securities laws and tax regulations, facilitating cross-border early-stage investments.^[6]^[3] From a strategic perspective, SAFEs streamline the fundraising process by standardizing terms like the investment amount, thereby minimizing negotiation time and reducing associated legal costs compared to bespoke equity agreements.^[1]^[7] This simplicity helps align incentives between founders and investors, as it postpones debates over immediate equity dilution, allowing both parties to prioritize the startup's progress toward milestones that could enhance future valuations.^[4]^[2]

Key Components

Standard terms

The standard Simple Agreement for Future Equity (SAFE) template, developed by Y Combinator, includes several core, non-negotiable elements that form the boilerplate structure of the agreement. These terms are designed to be straightforward and uniform across most implementations, minimizing negotiation while ensuring the instrument functions as a convertible security without immediate debt classification. The template emphasizes simplicity, with the investment treated as equity-like from inception, avoiding interest accrual or maturity dates typical of convertible notes.^[1] The investment amount, referred to as the "Purchase Amount" in the template, represents the principal sum provided by the investor to the company at the time of execution. It is typically classified as equity under Y Combinator's intent, though accounting treatment under US GAAP may vary and often records it as a liability until conversion; consult an accountant. Unlike debt instruments, it does not accrue interest, and the full principal is eligible for conversion without repayment obligations if no conversion occurs. This structure simplifies accounting for early-stage companies, treating the SAFE as deferred equity rather than a loan.^[1]^[8] Upon conversion, the SAFE entitles the investor to receive shares of preferred stock in the same series as those issued in the equity financing round that triggers the conversion, known as "Safe Preferred Stock." These shares carry identical rights, privileges, preferences, and restrictions as the standard preferred stock issued to other investors in that round, ensuring parity without creating a separate class. This conversion mechanism aligns the SAFE holder with the broader investor group in the priced round, typically a Series Seed or Series A, without diluting existing shareholders disproportionately beyond the agreed terms.^[1] Pro rata rights are included as an optional but commonly attached standard provision via a side letter, granting the investor the right—but not the obligation—to participate in future equity financings to maintain their proportional ownership percentage. Specifically, the investor may purchase additional shares equal to their as-converted ownership stake in the new round, calculated as the ratio of their SAFE-converted shares to the company's fully diluted capitalization post-conversion. This provision helps protect early investors from dilution in subsequent rounds and is often executed alongside the core SAFE to encourage participation without altering the base template.^[1] The governing law for the standard SAFE is typically the laws of the State of Delaware, particularly for U.S.-based startups incorporated there, as specified in the template's jurisdiction clause. This choice reflects Delaware's prevalence as the incorporation state for venture-backed companies due to its business-friendly corporate statutes and established case law. The agreement includes standard representations and warranties from the company, affirming that it is duly organized, in good standing, has full authority to enter the SAFE, and possesses all necessary rights to its intellectual property without conflicting obligations. Investors provide limited representations, such as their status as accredited investors and acknowledgment that the SAFE is unregistered under securities laws, with mutual indemnification limited to breaches of these warranties. These boilerplate assurances facilitate execution while allocating minimal liability.^[1]^[9]

Optional provisions

Optional provisions in a Simple Agreement for Future Equity (SAFE) allow parties to customize the instrument beyond the standard terms, providing flexibility to address specific negotiation needs in early-stage financing. These provisions are not mandatory but can be included to better align the interests of startups and investors, such as by offering additional protections or incentives for early funding. Y Combinator's SAFE templates support variations like these to facilitate tailored deals without altering the core structure, including variants with a valuation cap only, a discount only, both, or a Most Favored Nation (MFN) clause for uncapped SAFEs.^[1] In the post-money SAFE, a valuation cap sets a maximum post-money valuation at which the SAFE will convert into equity during a qualified financing round, ensuring that investors receive a larger ownership percentage if the company's actual valuation exceeds the cap. This provision protects early investors from dilution in high-growth scenarios by capping the implied valuation used for conversion calculations. For instance, if a startup raises funds at a $6.7 million cap, an investor contributing $1 million would secure approximately 15% ownership post-conversion. The cap is a key negotiation element, promoting transparency in ownership allocation.^[10] The discount rate provides SAFE holders with a percentage reduction on the share price paid by new investors in the next equity financing, rewarding early commitment with more favorable terms. Typically set at 20%, this rate—expressed as a discount (e.g., 20% off means paying 80% of the price)—applies directly to the conversion price, independent of the valuation cap if both are present. It incentivizes investment by lowering the effective cost per share, though the exact percentage is negotiable based on deal specifics.^[10] A Most Favored Nation (MFN) clause grants SAFE investors the option to amend their agreement to match more advantageous terms offered in subsequent SAFEs issued by the same company, such as a lower valuation cap or higher discount rate. This provision activates as a one-time election, excluding non-economic side letters, and helps maintain equity among early backers if better deals emerge later. It is particularly useful in uncertain funding environments, allowing investors to adopt superior economic protections without renegotiating the entire instrument, and is typically used in uncapped SAFEs.^[10] Side letter provisions consist of supplemental agreements that grant additional rights to specific investors, enabling deal-specific customizations without embedding them in the main SAFE document. Common examples include pro rata rights, which allow the investor to maintain their ownership percentage by participating in future equity financings on a pro rata basis—for instance, purchasing additional shares equivalent to their as-converted stake (e.g., 15% ownership enables investing $750,000 in a $5 million round). Other side letters may cover information rights, such as access to financial reports, or board observer status, providing non-economic benefits tailored to influential backers. These are optional and issued selectively to avoid applying universally to all SAFE holders.^[10]

Conversion Mechanics

Trigger events

The primary trigger event for conversion of a Simple Agreement for Future Equity (SAFE) is an equity financing round, in which the company issues preferred stock at a specified price. Upon the closing of such a round, the SAFE automatically converts into shares of the same series of preferred stock issued to new investors, without any minimum raise amount required in the current post-money SAFE form.^[11] This conversion applies to the initial closing of the financing, ensuring SAFE holders receive equity on equivalent terms, subject to any valuation cap or discount provisions.^[11] A liquidity event, such as an acquisition or initial public offering (IPO), also triggers conversion of the SAFE. In these scenarios, SAFE holders receive the same form of consideration as preferred stockholders, which may include cash, shares in the acquiring company, or other assets, calculated on an as-converted basis or the greater of that amount or the original purchase amount.^[11] For instance, in an acquisition where equity is issued, SAFEs convert into that equity; if the event results in a cash payout without equity issuance, holders may receive a direct cash distribution equivalent to their pro rata share.^[11] In the event of the company's dissolution or liquidation, the SAFE does not convert to equity but instead entitles the holder to repayment of their original purchase amount, ranking on par with preferred stockholders and junior to creditors.^[11] This repayment occurs only to the extent sufficient assets are available after satisfying senior obligations, with no accrual of interest or additional returns.^[11] If none of these trigger events occur, the SAFE remains outstanding indefinitely, with no maturity date or obligation for repayment, allowing the agreement to persist until a qualifying event takes place.^[11] This structure avoids default repayment scenarios, keeping the instrument as a perpetual right to future equity.^[11]

Valuation mechanisms

The valuation mechanism in a Simple Agreement for Future Equity (SAFE) determines the price at which the investment converts into shares during a triggering equity financing round, typically using a valuation cap, a discount rate, or both to protect early investors from dilution at higher valuations. The conversion price is calculated as the lower of two values: (1) the SAFE price, derived from the post-money valuation cap divided by the company's capitalization (the total number of outstanding shares, including options and convertibles, but excluding the new round's shares), or (2) the discount price, which is the price per share in the triggering round multiplied by the discount rate (e.g., 80% for a 20% discount).^[10]^[4] Once the conversion price is established, the number of shares issued to the SAFE holder is computed by dividing the original investment amount by this conversion price. For instance, the formula is:

\text{Number of shares} = \frac{\text{Purchase Amount}}{\text{Conversion Price}}

This yields the exact equity stake, assuming conversion into preferred stock of the same series as the triggering round.^[10] SAFEs convert on a pre-money basis relative to the triggering equity financing, meaning the SAFE shares are added to the capitalization before the new round's investment is factored in, which directly impacts ownership percentages by diluting pre-existing shareholders proportionally. This pre-money treatment ensures that SAFE holders receive their allocated shares without further adjustment for the new round's proceeds, simplifying cap table management while accurately reflecting the economic intent of the agreement.^[10]^[1] To illustrate, consider a $100,000 SAFE with a 20% discount (80% discount rate) that converts during an equity round valued at $10 million pre-money with shares priced at $1 each. The discount price is $1 × 0.80 = $0.80 per share (assuming no lower valuation cap applies). The investor then receives $100,000 / $0.80 = 125,000 shares, representing 1.25% ownership on the post-conversion pre-money cap table (before the new round's dilution).

Advantages and Disadvantages

Benefits for startups

Simple agreements for future equity (SAFEs) provide startups with a streamlined mechanism for raising capital, particularly in the early stages, by minimizing the complexities associated with traditional financing options. One primary advantage is the speed and simplicity of execution, as SAFEs consist of a single standard document with limited negotiable terms, typically only the valuation cap or discount rate, which significantly reduces legal fees and negotiation time compared to priced equity rounds. This allows founding teams to secure funding more rapidly and conduct rolling closings with multiple investors without waiting for a full round to materialize, enabling quicker access to capital for operational needs.^[1]^[12] SAFEs also alleviate immediate dilution and valuation pressures on startups by deferring the determination of company valuation and equity issuance until a future priced financing round, when the business has likely achieved greater growth and can command a higher valuation. This structure avoids forcing founders into potentially undervalued equity sales early on, preserving more ownership for the team during the critical initial development phase and aligning investor returns with the company's progress.^[1]^[12] From a financial perspective, SAFEs offer balance sheet advantages by avoiding classification as debt (unlike convertible notes), which eliminates interest expenses, repayment obligations, and the associated risks of default that could strain limited resources. Without a maturity date, startups face no pressure to repay funds or extend terms, maintaining a cleaner financial position that supports easier future fundraising and compliance with accounting standards, though they are typically accounted for as equity-like instruments pending conversion.^[12]^[2] Designed with founders in mind, SAFEs reduce the administrative burden in early-stage financing by providing a founder-friendly template that prioritizes operational focus over protracted legal processes, allowing teams to allocate time and resources toward product development and market expansion rather than deal structuring.^[1]^[12]

Disadvantages for startups

While beneficial for many early-stage scenarios, SAFEs may not suit all financing situations, lacking provisions for complex or edge-case needs, such as non-equity liquidity events without automatic conversion. If no qualified priced round occurs, startups avoid repayment but may face investor pressure or strained relationships, as SAFEs provide no maturity date or debt recourse. Additionally, post-money SAFEs, which predominated in 87% of issuances as of Q3 2024, offer clearer dilution upfront but can complicate negotiations in variable funding environments.^[1]^[12]^[13]

Risks for investors

Investors in Simple Agreements for Future Equity (SAFEs) face the risk of no guaranteed return on their investment, as these instruments lack provisions for interest accrual or a maturity date, potentially leaving capital invested indefinitely without any yield or repayment if no conversion event occurs.^[13] Unlike debt instruments such as convertible notes, SAFEs do not impose any obligation on the company to repay the principal, meaning investors have no recourse to recover funds in the absence of a successful liquidity event or equity financing round.^[13] This structure heightens the speculative nature of the investment, particularly in early-stage startups where failure rates are high. Dilution risks are particularly pronounced for SAFE holders when multiple SAFEs are issued, as conversions can stack during a subsequent priced round, eroding the ownership percentage that earlier investors anticipated.^[13] In pre-money SAFE structures, subsequent SAFE issuances further dilute prior investors by increasing the total outstanding SAFE obligations before calculating ownership shares upon conversion.^[13] Even in post-money variants, which offer some protection against dilution from additional SAFEs, broader equity issuances or down rounds can still significantly reduce an investor's stake, amplifying losses if the company's valuation declines.^[13] The timing of conversion introduces substantial uncertainty, as SAFEs only convert into equity upon triggering events such as a qualified equity financing or acquisition, which may be delayed, altered, or never materialize.^[13] This dependency on unpredictable future milestones can result in prolonged illiquidity, preventing investors from realizing any value or reallocating capital elsewhere.^[13] While features like a valuation cap can mitigate some dilution effects by setting an upper limit on the conversion price, they do not address the core timing risks inherent to the instrument.^[13] Tax and regulatory implications add further complexity for investors, with SAFEs potentially treated as equity for U.S. federal income tax purposes due to their economic substance, though the absence of IRS guidance creates uncertainty around eligibility for benefits like the Section 1202 qualified small business stock exclusion.^[14] If classified as a stock right rather than stock, the holding period for capital gains treatment may reset upon conversion, potentially disqualifying investors from favorable long-term rates or exclusions.^[14] Internationally, enforceability varies by jurisdiction, as SAFEs—designed primarily under U.S. law—may face challenges in recognition or compliance with local securities regulations, limiting protections for non-U.S. investors.^[1]

History and Development

Origins

The Simple Agreement for Future Equity (SAFE) was introduced in late 2013 by Y Combinator (YC), a prominent startup accelerator, as a streamlined alternative to convertible notes for early-stage funding in its accelerator programs.^[15]^[1] Developed specifically to address the complexities of seed investments, the instrument aimed to facilitate quicker and less burdensome financing rounds for emerging companies.^[16] The creation of the SAFE was led by Carolynn Levy, a YC partner and attorney who had previously drafted the accelerator's Series AA equity financing documents in 2008 and convertible note templates in 2010.^[15] Working with other members of YC's legal team, Levy sought to resolve key pain points in early funding, such as the debt-like attributes of convertible notes that introduced interest accrual, maturity dates, and repayment pressures, often complicating negotiations and future cap table management.^[16] By design, the SAFE eliminated these debt features, positioning it as a founder-friendly equity promise without the liabilities of traditional debt instruments.^[15] Upon its announcement on December 6, 2013, YC released the initial SAFE template publicly on its website, making it freely available to standardize seed-stage investments and encourage broad adoption beyond its own portfolio companies.^[15]^[1] This open-source approach reflected YC's goal of simplifying legal processes for startups, allowing investors to provide capital in exchange for future equity rights without the need for extensive customization or debt-related terms.^[16]

Evolution and updates

Following its initial launch in 2013, Y Combinator revised the SAFE template in 2018 by introducing the post-money valuation cap version, which calculates ownership percentages after accounting for all outstanding SAFEs and convertible instruments.^[17] This update aimed to provide clearer predictions of dilution for both founders and investors, particularly in scenarios involving multiple SAFE issuances or "stacks," where pre-money caps could lead to unpredictable ownership outcomes.^[18] Early versions of the SAFE faced criticism for ambiguity in dilution mechanics under the pre-money structure, as the lack of explicit definitions for handling stacked investments could disadvantage investors by resulting in lower-than-expected equity upon conversion.^[19] The 2018 revisions addressed these concerns by incorporating precise definitions and post-money mechanics, enhancing investor protection and simplifying cap table management without introducing interest or maturity dates.^[20] To support broader international adoption, adapted versions of the SAFE template have emerged for non-U.S. jurisdictions, including the UK and EU, with modifications to align with local securities regulations, tax implications, and corporate governance requirements.^[21] These variations maintain the core simplicity of the instrument while ensuring compliance, such as adjustments for EU prospectus rules or UK financial promotion restrictions.^[6] As of the first quarter of 2025, SAFEs have achieved widespread market penetration in the U.S., accounting for 70% of seed rounds and 90% of pre-seed rounds tracked by Carta.^[12] Despite this dominance, the instrument has faced growing scrutiny in the context of elevated interest rates, as investors increasingly prefer interest-accruing alternatives like convertible notes to compensate for delayed equity conversion.^[22]

Comparisons with Other Instruments

Versus convertible notes

Convertible notes are classified as debt instruments, functioning as short-term loans that must be recorded as liabilities on a startup's balance sheet, whereas Simple Agreements for Future Equity (SAFEs) are treated as equity rights with no debt classification or balance sheet impact.^[23]^[24] Convertible notes typically accrue simple interest at rates between 5% and 8% annually, which compounds the principal over time and increases the amount converted into equity upon a triggering event.^[25]^[26] In contrast, SAFEs carry no interest accrual, simplifying their financial treatment and avoiding any ongoing cost to the startup.^[5] A key distinction arises in maturity and repayment obligations: convertible notes include a maturity date, usually 18 to 24 months from issuance, after which the startup must repay the principal plus accrued interest if no conversion has occurred, potentially leading to default, acceleration of repayment demands, or even bankruptcy risks for the company.^[27]^[28] SAFEs, however, have no maturity date or repayment requirement, removing this temporal pressure and allowing startups to extend their runway without the threat of forced liquidation or creditor actions.^[29]^[30] This absence of default provisions in SAFEs further differentiates them, as there is no mechanism for investors to enforce repayment outside of equity conversion events.^[31] Both convertible notes and SAFEs feature similar conversion mechanics, converting into preferred stock during a qualified financing round, often incorporating a discount rate (typically 10-20%) or a valuation cap to reward early investors with a lower effective share price.^[23]^[32] The primary difference in this process is the impact of interest: for convertible notes, the accrued interest augments the principal before conversion, yielding more shares for the investor compared to a SAFE of equivalent initial investment, where no such adjustment occurs.^[5]^[33] Startups often prefer SAFEs over convertible notes due to their avoidance of debt covenants, which in notes can impose restrictions on operations, additional fundraising, or financial decisions, thereby preserving greater flexibility for founders.^[34]^[35] By not appearing as liabilities, SAFEs also simplify accounting, reduce compliance burdens, and make the company more attractive to future debt providers or acquirers who might view note-related debt unfavorably.^[8]^[36] Overall, this equity-oriented structure positions SAFEs as a more streamlined and startup-friendly alternative, particularly in early-stage financing where minimizing administrative and financial complexities is paramount.^[30]^[37]

Versus priced equity rounds

A priced equity round involves investors purchasing shares at a fixed price per share, determined by an immediate valuation of the company, which results in the issuance of equity ownership right away.^[38] In contrast, a Simple Agreement for Future Equity (SAFE) defers valuation until a future triggering event, such as a subsequent priced round, where the investment converts into shares without requiring an upfront valuation or immediate share issuance.^[1] This deferral allows startups to avoid committing to a specific valuation during early stages when company metrics may be uncertain or underdeveloped.^[38] Priced equity rounds are generally more complex and costly due to the need for extensive due diligence, negotiation of detailed terms, board approvals, and preparation of comprehensive legal documents, often incurring legal fees ranging from $40,000 to $120,000 or more for seed or Series A financings.^[38] SAFEs, by design, streamline this process with a single, standardized document that requires minimal negotiation—typically limited to elements like a valuation cap—and enables individual closings with investors as funds arrive, reducing overall legal and administrative expenses significantly.^[1] This simplicity makes SAFEs particularly efficient for rapid fundraising without the prolonged timelines associated with priced rounds. In a priced equity round, dilution of founders' and existing shareholders' ownership occurs immediately upon investment, as shares are issued based on the agreed-upon valuation and price per share.^[38] With SAFEs, dilution is postponed until conversion at a future event, potentially allowing founders to retain higher ownership percentages if the company achieves a higher valuation later, though this introduces uncertainty for investors regarding their eventual stake.^[1] Such delayed dilution can benefit startups by preserving control during growth phases. Priced equity rounds are typically suited for later-stage companies, such as Series A or beyond, where proven metrics like revenue or user growth justify a clear valuation and attract institutional venture capital firms seeking defined ownership.^[38] SAFEs, however, are better aligned with early-stage or pre-seed phases, where valuations are speculative and speed is prioritized over precision, enabling founders to secure capital quickly amid high uncertainty.^[1]

References

[1]
YC Safe Financing Documents | Y Combinator
Y Combinator introduced the safe (simple agreement for future equity) in late 2013, and since then, it has been used by almost all YC startups and countless non ...The Handshake Deal Protocol
[2]
Simple Agreement for Future Equity (SAFE): Definition, Benefits, and ...
A simple agreement for future equity (SAFE) is a seed-funding instrument that issues equity rights to be converted at a later date if triggered.
[3]
https://uk.practicallaw.thomsonreuters.com/w-001-0673
[4]
SAFE Note (Y Combinator) | Definition + Calculation Example
Sep 18, 2024 · SAFE Note—or Simple Agreement for Future Equity—is a form of early-stage startup financing introduced by Y Combinator in 2013.
[5]
Understanding SAFEs and priced equity rounds : YC Startup Library
Oct 17, 2018 · So, as I said, SAFE, the S stands for simple. The rest of it is a Simple Agreement for Future Equity. And put simply, it's an instrument where ...<|control11|><|separator|>
[6]
Investment tools explained: SAFEs for European startups - SeedBlink
Feb 13, 2025 · One financing instrument that has gathered attention is the Simple Agreement for Future Equity, mostly known as SAFE, originally introduced by Y ...
[7]
SAFE Notes: The Essential Guide for Startups - Cake Equity
SAFE note, also known as a Simple Agreement for Future Equity, is a type of investment contract commonly used by startups to raise capital from early-stage ...
[8]
SAFE Financing – Easy Instructions for Use - Wyrick Ventures
Just before the signatures, in the second-to-last paragraph (Subsection (f)), fill in the “Governing Law Jurisdiction,” which is normally the same as your ...Missing: template | Show results with:template
[9]
None
### Summary of Optional Provisions in YC SAFE (Post-Money User Guide, Feb 2023)
[10]
None
### Summary of Standard Terms of Post-Money SAFE (v1.1)
[11]
A Crash Course on SAFEs - StartupPercolator
Valuation Cap: SAFE Price = Valuation Cap / Company Capitalization · Discount: SAFE Price = next round price * (100% – discount) · Valuation Cap + Discount: ...<|control11|><|separator|>
[12]
What is a SAFE? (Simple Agreement for Future Equity)
### Summary of Benefits of SAFEs for Startups
[13]
[PDF] Using (and Misusing) Deferred-Equity Instruments for Seed Investing
Jun 25, 2020 · The post-money valuation feature is very pro-investor. It protects the safe investors from subsequent dilution and causes the founders (and ...Missing: implications | Show results with:implications
[14]
[PDF] R A I L - Frost Brown Todd
In this article, the author reviews in detail the federal income tax treatment of Simple Agreements for Future Equity. The Simple Agreement for Future Equity ( ...
[15]
https://www.ycombinator.com/blog/announcing-the-safe-a-replacement-for-convertible-notes/
[16]
Announcing the Safe, a Replacement for Convertible Notes
Dec 6, 2013 · A "safe" is a "Simple agreement for future equity" that replaces convertible notes, giving investors the right to buy stock, but without the ...
[17]
[PDF] The SAFE, the KISS, and the Note: A Survey of Startup Seed ...
The SAFE was developed by Carolynn Levy, an attorney and partner at Y Combinator, and was first released in 2013.16 In many respects, the SAFE resembles the ...
[18]
New Standard Deal - Y Combinator
Sep 28, 2018 · We are changing the standard deal at YC and increasing our investment from $120K to $150K. The $150K investment for 7% will be made on a post-money cap safe.
[19]
Y Combinator Releases New "Post-Money" Forms of Safes
Oct 19, 2018 · In late September 2018, Y Combinator released new forms of Simple Agreements for Future Equity (“Safes”) containing significant changes to ...Missing: template | Show results with:template
[20]
SAFE Financing – a Deep Dive on the Evolution of ... - Wyrick Robbins
Jun 28, 2024 · The Y Combinator-hosted SAFE (Simple Agreement for Future Equity) has become the investment contract of choice for startup companies that have already ...
[21]
What You Should Know About SAFEs - Cooley GO
However, Y-Combinator has provided for a pro rata side letter which can be signed with specific investors in conjunction with the Post-Money SAFE. Pro rata ...
[22]
SAFE Agreements: US, England & Wales & Bulgaria
Oct 6, 2025 · Since its introduction by Y Combinator in the US in 2013, the Simple Agreement for Future Equity ... UK, EU, and Bulgaria. Our team assists ...
[23]
At pre-seed and seed, the dominance of SAFEs continues to grow
Jan 7, 2025 · From the start of Q4 2023 through the end of Q3 2024, about 64% of all seed rounds raised on Carta were SAFEs. Priced equity rounds made up 27% ...
[24]
Convertible Notes & SAFEs: Still Popular, But Terms Are Tightening
Jul 24, 2025 · Interest rates on convertible notes rose by 200 to 300 basis points, and discount rates climbed as high as 10.5 percentage points in larger ...
[25]
Convertible Securities: SAFEs vs. Convertible Notes - Carta
Aug 9, 2024 · Convertible notes are debt with interest and maturity dates, while SAFEs are equity with no maturity or interest, but both can have valuation ...
[26]
Why SAFE Notes Are So Rapidly Overtaking Convertible Notes as ...
Jun 26, 2025 · Unlike convertible notes, SAFEs are not loans and thus do not carry debt on the company's balance sheet. They do not accrue interest and have no ...
[27]
What Are the Typical Interest Rates for Convertible Notes - UpCounsel
Rating 5.0 (948) Apr 16, 2025 · Typical convertible note interest rates range from 2% to 8%, most commonly 5–6%. Higher interest rates can increase the overall conversion value ...
[28]
Convertible Notes: What Startups Need to Know in 2025 - Gilion
Since a convertible note is debt, it typically accrues simple interest—usually 4–8% annually. This interest is added to the principal and converted into equity.<|control11|><|separator|>
[29]
Understanding Convertible Notes: A Guide for Startups and Investors
Apr 30, 2024 · Unlike traditional bank loans, convertible notes don't require monthly interest payments, which allows startups to focus on growth without ...
[30]
SAFE vs. Convertible Notes: What Founders Need to Know (and ...
Sep 15, 2025 · Convertible notes, at the very least, demonstrate a growing repayment obligation, which makes the dilution risk more visible. Companies using ...Missing: 2023 2024
[31]
SAFE vs Convertible Notes - Hustle Fund
Jul 17, 2025 · SAFEs are placeholders for equity, while convertible notes are loans that can turn into equity, and are technically owed back. SAFEs have no ...Quick Breakdown Of Safes · When An Investor Asks For... · Reality Check
[32]
A Guide to Seed Fundraising - Y Combinator
Jan 7, 2016 · Convertible debt has been almost completely replaced by the safe at YC and Imagine K12. A safe acts like convertible debt without the interest ...
[33]
SAFE vs Convertible Note: Key Differences in Startup Funding ...
Mar 31, 2025 · SAFE stands for Simple Agreement for Future Equity. Y Combinator introduced it in 2013 as a founder friendly alternative to convertible notes.What Is A Safe Note? · Safe Note Vs. Convertible... · Use A Safe Note If<|control11|><|separator|>
[34]
Comparing the Conversion Mechanics of Safes and Convertible Notes
May 10, 2024 · The principal difference between Safes and convertible notes lies in their treatment of “shares outstanding” when determining price per share.
[35]
6 Difference between Convertible Notes vs SAFE agreements - Qapita
Convertible notes provide early-stage funding through debt that later converts into equity, while SAFEs streamline the process with a straightforward equity ...
[36]
SAFE vs Convertible Note: Which Is Best for Your Startup? - Lazo One
Apr 24, 2025 · SAFEs don't create debt on your balance sheet. Convertible notes are considered debt until they convert, which can create additional risk for ...
[37]
Convertible Notes vs Simple Agreement for Future Equity (SAFE)
Jul 11, 2025 · Unlike CLNs, SAFEs aren't debt, they don't accrue interest or have a repayment date, and they don't give investors control over the business.
[38]
Accounting for SAFE notes - Kruze Consulting
The primary reason for using a SAFE is the lower legal costs and reduced paperwork complexity.
[39]
SAFE vs Convertible Notes: Key Differences - Allied Venture Partners
Jun 19, 2025 · Smaller deals (those under $250,000) accounted for 44% of pre-priced rounds in Q4 2024, up from 30% in the same quarter of 2023. For first-time ...Missing: impact | Show results with:impact
[40]
SAFE vs Convertible Note: Complete Comparison (2025)
Both defer valuation to a future priced round, but they differ significantly in structure, terms, and founder impact. Why this comparison matters: Choose the ...Missing: 2023 2024<|control11|><|separator|>
[41]
Understanding Priced Rounds vs SAFEs - Carta
Aug 29, 2024 · A priced round is when an investment is exchanged for equity in a company based on its valuation. Learn more about priced rounds and how they work.