Simple Agreement for Future Equity (SAFE)

Simple Agreement for Future Equity (SAFE)

Drafts a SAFE granting investors future equity rights upon triggering events — no immediate ownership, no debt.

Quick Start

Gather before drafting:

1. Company — legal name per certificate of incorporation, jurisdiction, state of formation
2. Investor — legal name, entity type, accredited investor basis
3. Economics — purchase amount, valuation cap, discount rate (if any)
4. Cap table — existing SAFEs, convertible notes, fully-diluted share count
5. Special terms — MFN clause, pro rata rights, side letters

Document Structure

Header & Recitals

Conversion Mechanics

Three triggering events:

1. Equity Financing (automatic)

• Converts into preferred stock of same series issued to new investors
• Conversion price = lesser of:
  • Cap price: Valuation Cap ÷ Pre-money fully-diluted capitalization
  • Discount price: Price per share × (1 − Discount Rate)
• Shares = Purchase Amount ÷ Conversion Price
• Include worked numerical example

2. Liquidity Event (acquisition/merger/IPO)

• Investor elects: cash = Purchase Amount OR common stock = Purchase Amount ÷ Liquidity Price
• Specify election timeline and default

3. Dissolution

• Cash = Purchase Amount, pre-dissolution
• Priority: senior to common, subordinate to creditors/debt

Valuation Terms

Representations

Investor:

• [ ] Investment purpose (not for resale — supports private placement exemption)
• [ ] Accredited status — individual (income/net worth) or entity (assets/equity owner/institutional)
• [ ] Risk acknowledgments: speculative, total loss, illiquid, indefinite hold
• [ ] Sophistication or qualified advisors

Company:

• [ ] Valid incorporation and good standing
• [ ] Corporate power and authority
• [ ] Board/stockholder approvals obtained
• [ ] Binding obligation (standard bankruptcy/equitable exceptions)
• [ ] No conflict with charter, material contracts, or law

Rights & Restrictions

Pre-conversion — no stockholder rights (no voting, dividends, distributions, preemptive rights).

Transfer — no transfer without written consent; unauthorized = void. Optional exceptions for affiliates, estate planning, retirement accounts.

Securities — unregistered; restrictive legends required; investor acknowledges illiquidity.

Administrative Provisions

Signature Blocks

Both Company and Investor: signature, printed name, title (entities), date.

Checks

1. Defined terms — capitalize consistently; define before first use
2. Math precision — conversion formulas unambiguous to any financial professional
3. Cross-references — verify all internal section references
4. No placeholders — replace all [brackets] before finalizing
5. YC compatibility — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations
6. Securities exemptions — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements
7. MFN conflicts — check prior SAFEs for MFN clauses that could trigger
8. Missing info — identify gaps and request from user before finalizing