SAFE

Category: Funding Stages & Instruments · Level: Entry · Also called: Simple Agreement for Future Equity

TL;DR

Y Combinator's Simple Agreement for Future Equity — a contract that gives an investor the right to equity in a future priced round, with no debt or interest.

A SAFE is a contract created by Y Combinator in 2013 to standardize early-stage investing. Unlike a convertible note, a SAFE is not debt: there's no interest, no maturity date, and no repayment if the company fails. It converts into equity at the next priced round, usually at a discount, a valuation cap, or both.

SAFEs come in pre-money and post-money flavors; the post-money SAFE introduced in 2018 is now standard at YC. SAFEs are popular because they close fast (a few hours of legal work) and avoid the complexity of negotiating a priced round at the earliest stage.

Worked example

A team raises $1M on a post-money SAFE with a $10M cap. If the next priced round closes at a $40M pre-money valuation, the SAFE converts at the $10M cap → SAFE holder owns $1M ÷ $10M = 10% post-money on the SAFE round.

Common pitfalls

  • Stacking many SAFEs at different caps without modeling dilution.
  • Confusing pre-money and post-money SAFE math.
  • Treating the cap as the price — it's a ceiling, not a guarantee.

When this shows up in a pitch deck

SAFE structure shows up implicitly in cap-table modeling but rarely in deck copy itself. Deckmetric's YC framework page links to SAFE conversion mechanics.

See SAFE in context

SAFE shows up most often in these scoring rubrics and investor profiles — jump straight to who cares about it and how to pitch them.

For investor types

Related terms

  • Post-Money SAFE — The 2018 YC SAFE variant where the valuation cap is computed on a post-money basis, making the investor's ownership share predictable.
  • Pre-Money SAFE — The original (2013) SAFE variant where the valuation cap was computed on a pre-money basis, sharing dilution across SAFE holders.
  • Convertible Note — Short-term debt that converts into equity at a future priced round, typically with a discount, a valuation cap, and an interest rate.
  • Valuation Cap — The maximum company valuation at which a SAFE or convertible note will convert into equity, protecting early investors from dilution at high prices.
  • Discount Rate (Convertible) — The percentage discount a convertible note or SAFE holder receives off the next priced round's price per share.

Frequently asked questions

Is a SAFE debt or equity?
Neither. A SAFE is a contract that converts into equity in a future priced round. It's not a loan, so there's no interest or maturity, but it's not equity either until conversion happens.
What's the difference between a pre-money and a post-money SAFE?
A post-money SAFE locks in the SAFE investor's percentage ownership at conversion, regardless of how many other SAFEs convert. A pre-money SAFE leaves the investor's percentage subject to dilution by other simultaneously-converting SAFEs. Post-money SAFEs are now the YC standard.

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