What is a SAFE
A SAFE (Simple Agreement for Future Equity) is a short contract. The investor wires money now; the shares arrive automatically when the company raises its next priced round.
- Standard — investors and founders already know it
- Simple — usually only the valuation cap is negotiated
- Clear — easy to work out who will own what
- Proven — used by thousands of companies for over a decade
How it works
With a post-money SAFE (the standard since 2018) the ownership sold is exact: investment ÷ valuation cap. Pick how much to raise and how much of the company you will sell; the cap follows.
For example, raising $1,000,000 for 15% means a post-money cap of about $6.67M. On the same cap, $500,000 buys about 7.5% and $800,000 about 12%. Several SAFEs can sit on different caps — each one's share is worked out on its own and they add up.
Calculator
$
$
%
$
Next priced round (optional)
$
After the SAFEs convert
Founders90.0%
SAFE investors10.0%
An approximation: no option pool and no other holders. Check real numbers with a lawyer or an accountant.
Terms
- Valuation cap
- The highest valuation at which the SAFE converts. However high the next round prices, the holder converts at the cap's price.
- Discount
- A lower price than the next priced round, e.g. 20% off. With both a cap and a discount, the better of the two for the investor applies.
- Post-money SAFE
- The cap is measured after the SAFE money is in — which is why the ownership is exact and known in advance.
- MFN (most favoured nation)
- No cap and no discount: it takes the best terms of any SAFE issued later.
- Pro rata rights
- The right to invest again in later rounds; given in a side letter, not in the SAFE itself.
- Conversion
- When the company raises a priced round, the SAFE turns into preferred shares automatically.
SAFE vs note vs priced round
| SAFE | Convertible note | Priced round | |
|---|---|---|---|
| Cost (legal fees) | Low | Medium | High |
| Speed | Days | Weeks | Weeks to months |
| Debt? | No — no interest, no maturity | Yes — interest and a maturity date | No — shares now |
| Control | Usually no governance rights | Usually none | May come with a board seat and rights |
The forms
The official SAFE forms are on Y Combinator's own site: three post-money SAFEs for US companies (cap only, discount only, MFN), an optional pro rata side letter and the SAFE User Guide, plus forms for companies formed in Canada, the Cayman Islands and Singapore.
For a company formed in Uzbekistan: these forms are written under other countries' laws. Talk to a lawyer licensed in Uzbekistan before you use one.
FAQ
Is a SAFE debt?
No. A SAFE has no interest and no maturity date. It is a right to future shares.
When does a SAFE convert?
Automatically, when the company raises a priced equity round. There is no minimum round size.
What if there is both a cap and a discount?
The investor converts at whichever of the two gives the lower price.
How do I know how much I am selling?
With a post-money SAFE: investment ÷ cap. The calculator above also handles several SAFEs and the next round.
Can I issue a SAFE with no cap?
Yes: use the MFN form, or the discount form with the discount you choose.
What happens if the company is sold or shuts down?
On a sale the holder gets the greater of their money back or what converting would pay. On a shutdown the holder is paid after debts and before common shareholders.
What if the same investor puts in more money?
Usually a new SAFE is issued — the existing one is not changed.
Where do pro rata and information rights go?
Not in the SAFE — in a separate side letter.
Can a company formed in Uzbekistan use a SAFE?
The SAFE was written for US law. For a company formed in Uzbekistan a local lawyer should adapt it or recommend another instrument. Many startups form an overseas (e.g. Delaware) company and raise on SAFEs.
Does UzCombinator invest on SAFEs?
The programme's terms — investment and equity included — are set in a separate agreement with each accepted startup. Questions: info@uzcombinator.uz.
This page is information, not legal, tax or accounting advice. Before signing anything, talk to a lawyer licensed where your company is formed.