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What is SAFE?

SAFE stands for Simple Agreement for Future Equity. It is a type of investment agreement commonly used in venture capital (VC) financing that allows investors to provide funding to startups in exchange for the right to receive equity in the company at a later point in time.

A SAFE is a convertible security that allows investors to purchase shares in a startup at a future date or event, such as the startup’s next financing round or an acquisition. Unlike traditional convertible notes, a SAFE does not carry an interest rate or maturity date, making it a simpler and more flexible instrument for both investors and startups.

SAFEs were first introduced by the startup accelerator Y Combinator in 2013 and have since become a popular financing tool in the early-stage startup ecosystem. They are often used in pre-seed and seed rounds to provide startups with a quick and easy way to raise capital without having to negotiate complicated terms or valuation.