Understanding SAFE Agreements: Benefits And Risks For Startups

A Simple Agreement for Future Equity (SAFE) is a contractual agreement between a startup company and its investors. It exchanges the investor’s investment for the right to preferred shares in the startup company when the company raises a future round of funding. The SAFE sets out conditions and parameters for when and how the capital will convert into equity. Unlike a convertible note, a SAFE does not accrue interest or have a maturity date.

SAFE was introduced by Y Combinator (the world’s preeminent startup accelerator) in late 2013. It was designed for early-stage startups and seed stage investors to raise capital quickly and simply. Since then,

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