A SAFE is a Y Combinator instrument giving an investor the right to equity in a future priced round in exchange for capital today. The full name is Simple Agreement for Future Equity. There is no interest, no maturity date, and no creditor claim. The SAFE converts into preferred shares when the company next raises a priced round, typically at a valuation cap, a discount, or both. It is the default early-stage instrument in the United States, has been adopted globally as the dominant alternative to the convertible note, and quietly compounds dilution in ways most founders do not model until conversion.
The mechanic: an investor wires money today against a signed SAFE document. The company is not in debt and owes no interest. The SAFE si...