What is a SAFE agreement?

A SAFE (Simple Agreement for Future Equity) is a fundraising instrument that gives an investor the right to receive equity in a future priced round.

Unlike a loan, a SAFE has no interest rate, no maturity date, and no repayment obligation. The investor gives you money now, and when you raise a priced round (Series A), their SAFE converts into preferred stock at a discount or valuation cap. YCombinator created the SAFE in 2013 as a simpler alternative to convertible notes. Key terms include the valuation cap (maximum company valuation at which the SAFE converts) and the discount rate (percentage discount to the Series A price). SAFEs are the standard instrument for pre-seed and seed fundraising in Silicon Valley. Lovie's formation package includes template SAFE documents.