What is a SAFE Note?
SAFE Note
A SAFE (Simple Agreement for Future Equity) Note is a financial contract created by Y Combinator that allows startups to raise capital without establishing an immediate valuation.
Detailed Deep Dive
A SAFE (Simple Agreement for Future Equity) Note is a financial contract created by Y Combinator in 2013, allowing startups to raise early-stage capital without immediately establishing a valuation. Under a SAFE, an investor provides capital in exchange for the right to receive equity in a future priced round (typically Series A). SAFEs are popular due to their simplicity, low legal costs, and speed of execution. They typically feature a valuation cap and/or a discount rate to reward early risk-takers when the conversion to equity occurs.
Frequently Asked Questions
Q:What does a valuation cap do in a SAFE?
It sets the maximum valuation at which the investor's money will convert into equity, protecting them from excessive dilution in high-priced rounds.
Q:Does a SAFE note accrue interest?
No. Unlike convertible notes, SAFE notes do not accrue interest and do not have a maturity date.
Quick Facts
- CategoryFunding
- Key ApplicationSeed and pre-seed stage financing
Coverage Trend12 Weeks
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SAFE Note Media Coverage & Intelligence
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