What is a SAFE?
A SAFE — Simple Agreement for Future Equity — is a popular early-stage fundraising instrument. An investor gives a startup money now, and in return receives the right to shares in the future, usually when the company raises a priced round. It lets founders raise capital quickly without having to agree a company valuation at the earliest, hardest-to-value stage.
Why founders and investors like SAFEs
They are fast, cheap and light on paperwork compared with a full equity round or convertible note. They defer the valuation question to a later, better-informed moment.
Key terms
- Investment amount.
- Valuation cap — the maximum valuation at which the SAFE converts.
- Discount — a reduction on the next round's price.
- Conversion trigger — usually the next priced financing.
Create your SAFE
Answer a few questions and download a clean SAFE. Related: Stock Purchase Agreement, Shareholder Agreement, Founders' Agreement.
FAQ
Is a SAFE debt or equity?
Neither exactly — it is a right to future equity. It is not a loan, so it usually carries no interest or maturity date.