The investor’s field guide · S
SAFE
A simple agreement for future equity that provides contractual rights to shares or proceeds on specified events.
Explained by the editorial team
SAFE stands for simple agreement for future equity. The instrument originated in US startup financing. Standard Y Combinator forms generally do not operate as interest-bearing loans or have a loan maturity date. Different versions and local adaptations can produce different outcomes.
How it works
An investor provides money now in exchange for rights defined in the agreement. A later equity financing may cause conversion into shares. The document also specifies treatment of events such as a company sale or dissolution. A valuation cap or discount can affect the conversion calculation.
What to examine
Check whether the form is pre-money or post-money and model all other outstanding instruments. A SAFE is not ordinary shares at the time of signing, and conversion is not assured on a convenient timetable. UK investors should not assume a US form qualifies for UK tax relief. Read the original SAFE documents and explanations and obtain advice for the relevant jurisdiction.
General information, not investment, legal or tax advice. Examples are illustrative. Read the disclaimer.