What is a SAFE note?
A SAFE is a simple agreement for future equity that converts to shares at your next priced round. Learn how caps, discounts and conversion work, with a calculator.
A SAFE (Simple Agreement for Future Equity) is a popular early-stage fundraising instrument created by Y Combinator. Investors give you money now in exchange for the right to shares later, when you raise a priced round — without setting a valuation today.
How a SAFE works
You receive cash now; the SAFE converts into equity at your next priced round (or on an exit). It is simpler and cheaper than a priced round because you defer the valuation negotiation. SAFEs are not debt — there is no interest or maturity date (unlike convertible notes).
Valuation cap and discount
- Valuation cap — the maximum valuation at which the SAFE converts. If your priced round is above the cap, the investor converts as if the company were valued at the cap, earning more shares for their early risk.
- Discount — lets the investor convert at a percentage (often 10–20%) below the round's share price.
Pre-money vs post-money SAFEs
The original SAFE was pre-money; YC's current standard is the post-money SAFE, which fixes the investor's ownership percentage more predictably. Post-money SAFEs are simpler for investors to model but can dilute founders more than expected when several stack up.
SAFE vs convertible note
| SAFE | Convertible note | |
|---|---|---|
| Type | Equity agreement | Debt |
| Interest | None | Yes |
| Maturity date | None | Yes |
| Complexity | Lower | Higher |
Quick SAFE conversion check
Run the numbers on your own startup
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Open the SAFE Note CalculatorFrequently asked questions
Is a SAFE debt or equity?
A SAFE is neither traditional debt nor immediate equity — it is an agreement to issue equity in the future. Unlike a convertible note, it has no interest or maturity date.
What is the difference between pre-money and post-money SAFEs?
A post-money SAFE fixes the investor's ownership percentage based on the company valuation including all SAFEs, making dilution more predictable. Pre-money SAFEs calculate conversion before other SAFEs convert.
What happens to a SAFE if you never raise a priced round?
SAFEs typically convert on a priced equity round, an acquisition, or sometimes a dissolution. If none of those occur, terms vary — always read the specific document and consult a lawyer.