Written by — Co-Founder, Expert Sapiens
Reviewed March 2026
Fundraising & Equity
What Is SAFE Agreement?
Definition
A SAFE (Simple Agreement for Future Equity) is a common early-stage fundraising instrument that gives an investor the right to receive equity in a future priced round, in exchange for money invested today.
SAFEs were created by Y Combinator in 2013 as a simpler alternative to convertible notes. Unlike a convertible note, a SAFE is not a loan — it has no interest rate, no maturity date, and does not accrue debt. Instead, the investor receives equity when the company raises a priced round, at a valuation determined by the SAFE's terms (typically including a valuation cap and/or discount rate). Post-money SAFEs (the current standard) make dilution calculations more transparent. SAFEs have become the dominant instrument for pre-seed funding in the US startup ecosystem, valued for their simplicity and speed.
Why it matters
SAFE agreements are deceptively simple-looking but have important terms that significantly affect founder dilution and investor returns. Valuation caps, discount rates, and pro-rata rights all need careful consideration. A startup attorney can explain what you're agreeing to, ensure the documents are correctly structured, and help you understand how SAFEs convert and dilute your cap table before you sign.