Deal Terms
SAFE
Simple Agreement for Future Equity — a contract giving investors the right to receive equity in a future priced round, without debt mechanics.
A SAFE (Simple Agreement for Future Equity) was created by Y Combinator in 2013 and has become the dominant instrument for pre-seed and seed investing. The investor gives money now; in exchange, they receive the right to equity (preferred stock) when the company raises a priced round. Key terms: valuation cap (the maximum valuation at which the SAFE converts, protecting early investors from high Series A prices) and discount (typically 15-20%, reducing the conversion price to reward early risk). SAFEs are simpler than convertible notes: no interest rate, no maturity date, no debt obligation. If the company fails before a priced round, SAFE investors typically receive nothing (unlike convertible note holders who have a debt claim).