Definition
What is SAFE (Simple Agreement for Future Equity)?
A SAFE is an investment contract where an investor pays money now in exchange for shares issued later, usually at the next priced round. It is not debt: there is no interest and no maturity date.
SAFEs were introduced by Y Combinator in 2013 to make early fundraising quicker and cheaper than negotiating a priced round. Most SAFEs convert at a valuation cap, a discount, or both.
The post-money SAFE, now the common version, makes it easier for founders and investors to see exactly how much ownership each SAFE represents.
Common questions
SAFE vs convertible note: what's the difference?
Both convert into shares at a later priced round. A convertible note is debt with interest and a maturity date; a SAFE is not debt and has neither.
General information, not legal, tax or investment advice.