SAFE Note
A SAFE (Simple Agreement for Future Equity) is a contractual agreement between a startup and an investor that grants the investor the right to receive equity in a future priced round — without setting a valuation today.
In depth
Created by Y Combinator in 2013, SAFEs replaced convertible notes for most early-stage raises.
Key SAFE terms: - Valuation Cap: maximum valuation at which the SAFE converts (protects early investors) - Discount: percentage discount on next round price (typically 10–20%) - MFN (Most Favored Nation): if you raise on better terms later, early SAFE holders get those terms - Pro-rata rights: right to invest in future rounds to maintain ownership %
SAFE types: - Valuation cap only (most common for pre-seed) - Discount only - Cap + discount (investor-friendly) - MFN (no cap, no discount — rare)
SAFE vs priced round: SAFEs are faster and cheaper to close (no board seats, no complex terms). Priced rounds (Series A+) set a formal valuation and issue preferred stock.
Real example
A pre-seed founder raises $500K on a SAFE with a $5M valuation cap and 20% discount.
Tools & calculators
Related terms
Startup Runway
Startup runway is the number of months a startup can continue operating before running out of cash, given its current burn rate and cash balance.
VC (Venture Capital)
Venture Capital (VC) is a form of private equity financing where investors provide funding to early-stage, high-growth startups in exchange for equity ownership, with the expectation of a significant return on exit.
Burn Rate
Burn rate is the rate at which a startup consumes its cash reserves before reaching profitability. Gross burn is total monthly spending; net burn is spending minus revenue.
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