A simple agreement for future equity (SAFE) is a type of investment contract typically used by startup companies to raise seed funding. SAFE contracts are similar to convertible debt in that they can be converted into equity at a later date, but they do not accrue interest or have a maturity date like convertible debt instruments do.
If you're a startup looking to raise seed funding, a SAFE may be a good option for you. Here's a quick overview of how SAFE contracts work:
-SAFE contracts are agreements between a startup and an investor that stipulate that the investor will receive equity in the company at some future date.
-The equity is typically issued when the company raises additional funding, such as a Series A round of financing.
-SAFE contracts do not have an interest rate or a maturity date like convertible debt instruments do.
-SAFE contracts are typically used by early-stage startups who are not yet ready to issue equity.
If you're interested in learning more about SAFE contracts, we recommend checking out the Y Combinator SAFE tutorial.
