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A SAFE, also known as Simple Agreement for Future Equity, is a legal contract that companies, usually startups, use to raise capital. SAFEs, similar to warrants, delay the company’s valuation until a future date while providing the investor with the opportunity to invest or the company to raise capital.

Introduced in 2013 as a simple replacement for convertible notes, a SAFE gives the investor the right to receive equity of the company on certain triggering events, such as future equity financing or sale of the company.

Using a SAFE, the investor invests money in the company and, in exchange for the money, the investor receives the right to purchase stock in a future equity round subject to certain parameters set out in the SAFE.


SAFEs commonly have the following features:

        • No maturity date until a conversion event occurs;
        • SAFEs remain outstanding indefinitely;
        • No interest rate;
        • No accruing interest – investors receive only a right to convert their SAFEs into equity at a lower price than the investors in the subsequent financing (based either on the discount or valuation cap in their SAFEs);
        • Automatic conversion on any priced shares issue; and,
        • A valuation cap – i.e. the maximum value to which the SAFE will convert.


SAFEs offer several fundamental benefits that are critical important for startups and young companies:

        • As a flexible, one-document security without numerous terms to negotiate, SAFEs save companies and investors money in legal fees and reduce the time spent negotiating the terms of the investment.
        • Companies and investors will usually only have to negotiate one item: the valuation cap.
        • Because a SAFE has no expiration or maturity date, there should be no time or money spent dealing with extending maturity dates, revising interest rates or the like.
        • A SAFE allows for high resolution fundraising.
        • Companies can close with an investor as soon as both parties are ready to sign and the investor is ready to invest money, instead of trying to coordinate a single close with all investors simultaneously.
        • SAFE fundraising may be much easier now that both founders and investors have more certainty and transparency into what each side is giving and receiving.


        • SAFEs are neither debt nor equity. Instead, SAFEs are contractual rights to future equity. These rights are in exchange for early capital contributions invested into the company.
        • SAFEs allow investors to convert investments into equity during a priced round at some future point.
        • SAFEs are advanced, high-risk instruments that may never turn into equity.
        • SAFEs don’t accrue interest, nor are issuers required to repay investors if they fail.
        • However, when a SAFE goes smoothly, investors’ rights are generally greater than those rights of common stock shareholders. As such, SAFEs offer preferential rights, which are extremely attractive to experienced investors.