Simple Agreement For Future Equity (SAFEs)

What is a Simple Agreement for Future Equity ?

A Simple Agreement for Future Equity (SAFE) is a financing contract that allows startups to raise capital through seed financing rounds. Under a SAFE, an investor agrees to make a cash payment to a company in exchange for a contractual right to convert that amount into shares when a pre-agreed trigger event occurs. The trigger event could be a future financing round, an acquisition, or an IPO.

SAFE vs Convertible Notes

When it comes to financing a startup, two popular options are Simple Agreement for Future Equity (SAFE) and Convertible Notes. While both options allow startups to raise funds without having to set a valuation, there are some key differences between the two

How SAFEs are Beneficial for Startups?

Quick and Easy: Startups can quickly and easily raise capital from investors without having to negotiate complex terms and conditions.

No Dilution: A SAFE does not dilute the ownership of the startup because it does not involve the sale of equity at the time of investment. Instead, the investment is converted into equity at a later date, typically when the company has achieved a certain level of success.

Lower Cost: It does not involve the legal and financial fees associated with traditional equity financing. Startups can raise capital from investors without having to pay high legal and financial fees