What is SAFE (Simple Agreement for Future Equity)?
The fast, founder-friendly instrument that turns early cash into future shares at the next round.
SAFE (Simple Agreement for Future Equity): definition
Created by Y Combinator, the SAFE lets startups raise early money quickly without setting a valuation or taking on debt. The investor’s cash converts into shares at a later priced round, usually with a valuation cap (a maximum conversion price) and/or a discount that rewards them for investing early. Unlike a convertible note, a SAFE has no interest and no maturity date.
- Cash now in exchange for future equity - no valuation set today
- Valuation cap: the maximum price at which the SAFE converts
- Discount: a percentage off the next round’s price
- Unlike a convertible note, no interest and no maturity date
How Fintra handles it
Fintra tracks outstanding SAFEs on the cap table with their caps and discounts, and models how they convert at the next priced round - including the dilution they create. Because conversion can meaningfully change ownership, seeing SAFEs in the fully diluted picture before you raise prevents the common surprise of founders discovering how much of the company early SAFEs claim.
Worked example
Frequently asked questions
What is the difference between a SAFE and a convertible note?
Both convert to equity later, but a SAFE is not debt - it has no interest rate and no maturity date, making it simpler and more founder-friendly. A convertible note is a loan that accrues interest and must convert or be repaid by maturity.
What is a valuation cap on a SAFE?
The cap is the maximum company valuation at which the SAFE converts to equity, protecting early investors: if the priced round values the company above the cap, the SAFE converts at the cap price, giving the investor more shares per dollar. It directly affects dilution.
When does a SAFE convert?
Usually at the next priced (equity) financing round, converting the investment into shares at the round price adjusted by the cap and/or discount. Some SAFEs also convert on an acquisition or other liquidity event per their terms.
Does Fintra track SAFEs?
Yes. Fintra records outstanding SAFEs with their caps and discounts, includes them in the fully diluted view, and models their conversion and dilution at the next round - so founders see the true impact before raising.
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