SAFE
Also known as: Simple Agreement for Future Equity, Y Combinator SAFE
Simple Agreement for Future Equity — an instrument that grants the right to equity at a future priced round without accruing interest.
Full Definition
A SAFE (developed by Y Combinator) is a simpler alternative to a convertible note. Like a convertible note, it converts to equity at a future priced round at a discount or valuation cap. Unlike a convertible note, it is not debt — it does not accrue interest or have a maturity date. SAFEs have become the standard instrument for pre-seed and seed investment in many startup ecosystems, though convertible notes remain more common in some healthcare investor communities.
Example
A pre-seed healthcare startup raises $300K through two SAFE instruments — one with a $4M cap and one with a $6M cap — from angel investors before raising a priced seed round. The SAFEs convert when the seed round closes.