# What is SAFE Note? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/safe-note](https://spidits.com/startup-glossary/safe-note)

## Definition
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.

## Architectural Mechanics & 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.

## Industry Applications & Real-World Use Cases
Seed and pre-seed stage financing

## Frequently Asked Questions

### What is the difference between pre-money and post-money SAFE notes?
A pre-money SAFE converts based on the pre-round valuation, making investors subject to dilution from options and other convertible rounds. A post-money SAFE measures ownership after all convertible rounds convert, locking in a fixed percentage of ownership before institutional priced rounds.

### Does a SAFE note accrue interest?
No. Unlike convertible notes, SAFE notes do not accrue interest and do not have a maturity date.

## Related Terminology
- [convertible-note](https://spidits.com/startup-glossary/convertible-note)
- [valuation-cap](https://spidits.com/startup-glossary/valuation-cap)
- [discount-rate](https://spidits.com/startup-glossary/discount-rate)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*