A simple agreement for future equity (SAFE) is an agreement between an investor and a company that provides rights to the investor for future equity in the company similar to a warrant, except without determining a specific price per share at the time of the initial investment.
What is the difference between a convertible note and a SAFE?
A convertible note is debt, while a SAFE is a convertible security that is not debt. As a result, a convertible note includes an interest rate and maturity rate, while a SAFE does not. A SAFE is simpler and shorter than most convertible notes.
What does SAFE note stand for?
SAFE (or simple agreement for future equity) notes are documents that startups often use to help raise seed capital. Essentially, a SAFE note acts as a legally binding promise to allow an investor to purchase a specified number of shares for an agreed-upon price at some point in the future.
What does SAFE stand for Y Combinator?
simple agreement for future equity
What is a SAFE in VC?
A SAFE is an investment contract between a startup and an investor that gives the investor the right to receive equity of the company on certain triggering events, such as a: Future equity financing (known as a Next Equity Financing or Qualified Financing), usually led by an institutional venture capital (VC) fund.
What is a SAFE offering?
Some issuers have been offering a new type of security as part of some crowdfunding offerings—which they have called a SAFE. The acronym stands for Simple Agreement for Future Equity. These securities come with risks, and are very different from traditional common stock.
What does raising as SAFE mean?
Simple Agreement for Future Equity
How does a SAFE work?
How SAFEs Work. SAFE stands for Simple Agreement for Future Equity. ... That's where a SAFE comes in to play — it's a form of convertible security that allows you to postpone the valuation part until later on. A SAFE is neither debt nor equity, and there is no interest accruing or maturity date.
What is SAFE financing?
A simple agreement for future equity (SAFE) is a financing contract that may be used by a startup company to raise capital in its seed financing rounds. The instrument is viewed by some as a more founder-friendly alternative to convertible notes.
What should be in a terms sheet?
All term sheets contain information on the assets, initial purchase price including any contingencies that may affect the price, a timeframe for a response, and other salient information. Term sheets are most often associated with startups.
What is the purpose of a term sheet?
A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents.
What is a SAFE term?
A SAFE or safe stands for a “simple agreement for future equity”. ... In exchange for the money, with a SAFE, the investor receives the right to purchase stock in a future equity round (when one occurs) subject to certain parameters set in advance in the SAFE.