SAFE (Simple Agreement for Future Equity)
A contract that converts an investor's cash into equity at a future priced round, without interest or a maturity date.
A SAFE is not debt and not stock at the time of signing. It is a promise that the investor's money converts into preferred shares when the company later closes a priced equity round, typically with a valuation cap and/or a discount that rewards the SAFE holder for taking early risk.
Y Combinator introduced the SAFE in 2013 to replace convertible notes for seed rounds, removing the interest rate and maturity date that made notes awkward for founders. Most SAFEs used today are 'post-money' SAFEs, meaning the valuation cap sets the investor's ownership percentage after all other SAFEs and the round itself are accounted for, which makes dilution far more predictable than the old pre-money version.
Because a SAFE has no maturity date, it can sit on the cap table indefinitely if the company never raises a priced round, which is why some investors push for a most-favored-nation clause or a side letter with pro-rata rights instead of relying on the SAFE terms alone.
A seed investor puts in $250,000 on a SAFE with a $10M post-money valuation cap. When the company raises a Series A at a $10M pre-money valuation, the SAFE converts as if the investor had bought in at the $10M cap, giving them roughly 2.5% of the company before Series A dilution.
Use a post-money SAFE for speed and simplicity in seed rounds, but track every SAFE's cap and discount in a live cap table model before you raise priced money — stacking multiple SAFEs at different caps is the single most common source of founder surprise at Series A.
Is a SAFE debt or equity?
Neither at signing. It is a contractual right to receive equity in the future, with no interest accruing and no repayment obligation, which is why it does not sit on the balance sheet as debt.
Does a SAFE have a maturity date?
No. Unlike a convertible note, a standard SAFE never comes due — it only converts when a triggering event happens, most commonly a priced equity round.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.