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Fundraising & equity

SAFE note

Also known as Simple Agreement for Future Equity

A SAFE is an agreement to convert an investor's cash into equity at a future priced round, without being debt.

Updated July 2026·Sources: Carta

Key takeaways

  1. A SAFE is an agreement to convert an investor's cash into equity at a future priced round, without being debt.
  2. SAFEs are the default pre-seed and seed instrument because they close fast and cheaply, but stacking multiple SAFEs at different caps makes post-round dilution easy to underestimate without a clean cap table model..

What is safe note?

A SAFE is an agreement to convert an investor's cash into equity at a future priced round, without being debt. Created by Y Combinator, it has no interest or maturity date, just a valuation cap and/or discount that sets how much stock the investor gets when it converts.

Worked example

An investor puts in $250k on a SAFE with a $10M post-money cap. When the startup raises a priced round at $20M, the SAFE converts as if the company were worth $10M, roughly doubling the investor's share count.

Benchmarks by stage

In 2024, 61% of U.S. startup SAFEs used a valuation cap only, 30% used cap plus discount, 8% discount only, and 85% of all SAFEs were post-money.

Source: Carta (2024)

Why it matters for fast-growing companies

SAFEs are the default pre-seed and seed instrument because they close fast and cheaply, but stacking multiple SAFEs at different caps makes post-round dilution easy to underestimate without a clean cap table model.

Frequently asked questions

What is a valuation cap on a SAFE?+
A valuation cap is the maximum company valuation used to convert a SAFE into equity. It rewards early investors: if you raise your priced round above the cap, the SAFE converts at the lower cap price, giving those investors more shares per dollar than later, higher-priced investors.
What does MFN mean on a SAFE?+
MFN (Most Favored Nation) lets a SAFE holder automatically adopt the better terms of any later SAFE you issue, for example a lower valuation cap or higher discount. Y Combinator's standard uncapped SAFE includes an MFN provision to protect the earliest investors from being disadvantaged.
Is a SAFE debt?+
No. Unlike a convertible note, a SAFE is not a loan, it carries no interest rate and no maturity date, so there's nothing to repay if you never raise again. It simply converts to equity when a triggering event like a priced round, acquisition, or IPO occurs.

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