SAFE (Simple Agreement for Future Equity)

A Y Combinator instrument that converts into equity at a future priced round, without interest or a maturity date. Plain-language explainer with examples.

SAFE (Simple Agreement for Future Equity)

A Y Combinator instrument that converts into equity at a future priced round, without interest or a maturity date.

What SAFE (Simple Agreement for Future Equity) means

The SAFE is the dominant instrument for U.S. pre-seed and seed fundraising. It's not debt — it has no interest rate and no maturity date — and it converts into preferred shares when the company raises a priced round.

SAFEs come in two flavors: pre-money (older, still used) and post-money (introduced by Y Combinator in 2018 and now standard). Post-money SAFEs make dilution math cleaner because each SAFE holder's ownership is fixed at signing rather than diluted by later SAFEs.

Key terms to negotiate: valuation cap, discount, and MFN (most-favored nation) clause.

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