SAFE (Simple Agreement for Future Equity)
Definition
A SAFE is a contract where an investor pays now and receives shares later, when a priced round converts it at its valuation cap or discount. It carries no interest and no maturity date.
How it comes up in fundraising
Introduced by Y Combinator in 2013 and revised to the post-money form in 2018, the SAFE is the default instrument for US pre-seed and seed rounds.
Frequently asked questions
How does a SAFE convert?
At the next priced round, at the cap or the round price, whichever favors the investor; $100K on a $5M post-money cap converts to at least 2 percent.
What is the risk of stacking SAFEs?
Post-money SAFEs lock each investor’s percentage, so every additional SAFE dilutes only founders; stacks quietly sell 20-plus percent before Series A.
SAFE or convertible note?
US early-stage rounds default to SAFEs; notes persist in bridges and some non-US deals where debt framing is preferred.
Round Funded resources
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