Simple Agreement for Future Equity
Convertible instrument that converts to equity at a future priced round.
Definition
A SAFE is a financing contract created by Y Combinator in 2013 that gives investors the right to receive shares in a future priced equity round, typically at a discount and/or subject to a valuation cap. Unlike convertible notes, SAFEs carry no interest rate and no maturity date. Since 2018 the standard YC SAFE is post-money, which makes the holder's ownership easier to calculate before the priced round. A SAFE converts when a priced equity round occurs, and has specific terms for a sale or dissolution before conversion. Stacking many SAFEs can produce surprising dilution, so founders should model conversion in the cap table.What this means in practice
Early-stage MedTech companies often raise seed capital through SAFEs to defer the valuation discussion until clinical or regulatory milestones (first-in-human, 510(k) submission, CE mark) materially de-risk the company. Stacking many SAFEs without modeling dilution at conversion is a frequent founder mistake.Examples
- A diagnostics startup raises $2M on a post-money SAFE with a $15M cap to fund an analytical validation study.
- An implant company uses a discount-only SAFE for a strategic angel before its Series A.
- •Confusing pre-money and post-money SAFEs - post-money SAFEs guarantee the investor's ownership percentage and are far more dilutive at conversion.
- •Issuing too many SAFEs with different caps, creating a 'SAFE stack' that surprises founders at the priced round.
Frequently asked questions
Related terms
Grouped by themeEditor's picks
· Hand-selected related conceptsShort-term debt that converts into equity at a future financing round.
An equity financing in which the company and investors agree on a per-share price and issue preferred stock, as opposed to a convertible note or SAFE.
Maximum company valuation at which a SAFE or note converts to equity.
More in Investment & Finance
· Same categoryAn independent fair-market-value appraisal of common stock used to set tax-compliant strike prices for employee stock options.
Adjustment that protects investors if the company raises a future round at a lower price.
The governing body elected by stockholders that oversees management, approves major corporate actions, and typically includes investor-designated seats after venture financing.
Interim financing between priced rounds, usually convertible.
Where this term appears across MedTech Terms.
Latest in MedTech
Sources
3 sourcesSources support the definition or relevant regulatory context, not necessarily every claim on this page. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.
- 1Y Combinator SAFETier 4 VerifiedY Combinatorycombinator.com
- 2SEC Investor Bulletin: SAFEsTier 2 VerifiedSECsec.gov
- 3NVCA Model DocumentsTier 4 VerifiedNVCAnvca.org
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