Legal Documents

What is a Simple Agreement for Future Equity (SAFE) ?

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.

Key points included

  • 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.

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