A Simple Agreement for Future Equity (SAFE) is a contract by which an investor makes a cash investment into a company in return for the rights to subscribe for new shares in future.
Under a Simple Agreement for Future Equity (SAFE), the investment is converted into equity when there is an “equity financing”, a “liquidity event”, or “a dissolution event”.
Contrary to a convertible note, a Simple Agreement for Future Equity (SAFE) does not carry interest, does not expire, and does not specify a minimum amount of funds to be raised at the equity financing.
- Amount of investment that the investor will make;
- How the conversion price will be set;
- If applicable, what the discount rate for the investor will be;
- If applicable, what the valuation cap for the investor will be; and
- Whether you wish to give pro rata rights to the investor.