April 14, 2021 by investor
SAFE stands for Simple Agreement for Future Equity. SAFE notes were created to provide a convertible note-like structure for startup funding but without interest rates or maturity dates.
The SAFE note operates like a warrant which gives the investor the right to buy shares in a future-priced round. SAFEs are similar to convertible notes as they eventually convert to equity, but are different as they are not debt instruments.
There are many flavors of SAFE notes. Some come with valuation caps and some do not. Some come with discount rates and some do not.
Startups use them because they are simple, although the cap table treatment later may require more work.
Technically, you should have a C-Corp if using a SAFE note as it must be noted on the cap table.
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