Modern Counsel for Growing Companies
In plain English
Short for Simple Agreement for Future Equity: a financing contract providing specified rights to future equity or payments upon defined events. A standard YC SAFE generally has no interest or maturity date, unlike a conventional convertible note. Variants differ, and a SAFE investment ordinarily does not immediately issue stock.
Types and key distinctions
Post-Money SAFE
A SAFE structured so its capitalization definitions include the SAFE financing in the post-money valuation-cap calculation. It can make the estimated ownership sold at the cap easier to model before the next priced round. The holder generally has contractual rights to future equity, rather than immediately issued shares; actual conversion follows the instrument.
Pre-Money SAFE
A SAFE whose valuation-cap mechanics use a pre-money capitalization framework rather than the post-money SAFE structure. Additional convertible instruments and later financing terms can affect the ownership ultimately received. A founder should model the actual documents instead of assuming investment divided by cap fixes the final percentage.