Definition
A Simple Agreement for Future Equity (SAFE) is a funding instrument that allows investors to provide capital to a startup in exchange for future equity, typically without setting an immediate valuation.
Related Services
SAFEs are commonly used in early-stage fundraising, particularly by startups that are not yet ready for priced equity rounds.
Problem and Application
While SAFEs offer flexibility, they can complicate future funding rounds if not properly structured. Investors may negotiate valuation caps and discount rates to manage risk.
Conclusion
SAFEs provide an efficient way for startups to raise early-stage funding, but founders must carefully structure agreements to maintain control and equity balance.
