Raising funding for your startup? Most pre-seed investors expect to use this one document.

If you’re a lawyer or a seasoned founder, you already know this stuff. No surprises here.

But if you’re just starting your founder journey and haven’t heard of SAFEs before, keep reading.

building skala.io, partner at buzko.legal

SAFE = Simple Agreement for Future Equity. It was introduced by Y Combinator in 2013, and since then has become the global standard for pre-seed deals around the world.

Now, not all SAFEs are the same. Investors care about two key terms:

1/ Valuation Cap — sets the max valuation for converting into equity

2/ Discount — gives investors a cheaper price per share than the next round

That usually means a future funding round. If the round never comes, the startup doesn’t have to pay anything back. That’s why founders love SAFEs. Unlike convertible notes, there’s no debt hanging over your head.

Think of it as a hybrid between a loan and equity.

An investor gives your startup money in exchange for a promise of future shares, but only if a “liquidity event” happens.