SAFE

A SAFE, or simple agreement for future equity, is a contract in which an investor provides capital now for the right to receive equity under specified future conditions. Unlike traditional debt, a standard SAFE generally has no maturity date or interest rate. Conversion is commonly shaped by a valuation cap, a discount, or both, and the exact mechanics depend on the document.

“Simple” does not mean economically trivial. Several SAFEs with different caps can create substantial dilution when they convert, and pre-money versus post-money forms allocate ownership differently. Founders should model conversion alongside the option pool and proposed priced round rather than adding the face values alone. A deck usually does not need to teach the instrument, but the fundraising ask and data room should state what is being offered and disclose existing convertibles accurately. Investors should read the actual agreement because side letters, pro rata rights, and most-favored-nation provisions can change the outcome. Legal and tax advice is appropriate for both companies and investors.