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:
- Company — legal name per certificate of incorporation, jurisdiction, state of formation
- Investor — legal name, entity type, accredited investor basis
- Economics — purchase amount, valuation cap, discount rate (if any)
- Cap table — existing SAFEs, convertible notes, fully-diluted share count
- Special terms — MFN clause, pro rata rights, side letters
Document Structure
Header & Recitals
| Element |
Requirement |
| Company ID |
Full legal name matching certificate of incorporation, entity type, jurisdiction |
| Investor ID |
Legal name, entity type, capacity to contract |
| Purchase amount |
Exact dollar figure |
| Core exchange |
Capital → contractual right to future equity; state explicitly: no debt, no interest, no current stockholder status |
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
| Term |
Function |
| Valuation Cap |
Ceiling on conversion valuation; larger stake if valuation exceeds cap |
| Discount Rate |
Reduction from new investor price; rewards early risk |
| Interaction |
Cap and discount are alternative (not additive); investor gets better result |
Representations
Investor:
Company:
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
| Provision |
Standard |
| Governing law |
State of incorporation or principal place of business |
| Disputes |
Litigation venue OR arbitration (rules, count, seat, costs) |
| Amendments |
Written, signed by both parties |
| Waivers |
Explicit, written; no implied waiver |
| Integration |
Entire agreement; supersedes prior negotiations |
| Notices |
Email, certified mail, or courier; specify addresses; deemed-received rules |
| Severability |
Reform invalid provisions; remainder survives |
Signature Blocks
Both Company and Investor: signature, printed name, title (entities), date.
Checks
- Defined terms — capitalize consistently; define before first use
- Math precision — conversion formulas unambiguous to any financial professional
- Cross-references — verify all internal section references
- No placeholders — replace all
[brackets] before finalizing
- YC compatibility — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations
- Securities exemptions — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements
- MFN conflicts — check prior SAFEs for MFN clauses that could trigger
- Missing info — identify gaps and request from user before finalizing
1---2name: safe-agreement3description: Drafts Simple Agreements for Future Equity (SAFE) for early-stage venture capital financing with valuation cap/discount mechanics, investor qualifications, and securities compliance. Use when drafting SAFEs, pre-seed investment documents, convertible equity instruments, or YC-style SAFE notes.4---5
6# Simple Agreement for Future Equity (SAFE)
7
8Drafts a SAFE granting investors future equity rights upon triggering events — no immediate ownership, no debt.
9
10## Quick Start
11
12Gather before drafting:
13
141. **Company** — legal name per certificate of incorporation, jurisdiction, state of formation
152. **Investor** — legal name, entity type, accredited investor basis
163. **Economics** — purchase amount, valuation cap, discount rate (if any)
174. **Cap table** — existing SAFEs, convertible notes, fully-diluted share count
185. **Special terms** — MFN clause, pro rata rights, side letters
19
20## Document Structure
21
22### Header & Recitals
23
24| Element | Requirement |
25|---|---|
26| Company ID | Full legal name matching certificate of incorporation, entity type, jurisdiction |
27| Investor ID | Legal name, entity type, capacity to contract |
28| Purchase amount | Exact dollar figure |
29| Core exchange | Capital → contractual right to future equity; state explicitly: no debt, no interest, no current stockholder status |
30
31### Conversion Mechanics
32
33Three triggering events:
34
35**1. Equity Financing (automatic)**
36
37- Converts into preferred stock of same series issued to new investors
38- Conversion price = lesser of:
39 - **Cap price**: Valuation Cap ÷ Pre-money fully-diluted capitalization
40 - **Discount price**: Price per share × (1 − Discount Rate)
41- Shares = Purchase Amount ÷ Conversion Price
42- Include worked numerical example
43
44**2. Liquidity Event (acquisition/merger/IPO)**
45
46- Investor elects: cash = Purchase Amount OR common stock = Purchase Amount ÷ Liquidity Price
47- Specify election timeline and default
48
49**3. Dissolution**
50
51- Cash = Purchase Amount, pre-dissolution
52- Priority: senior to common, subordinate to creditors/debt
53
54### Valuation Terms
55
56| Term | Function |
57|---|---|
58| Valuation Cap | Ceiling on conversion valuation; larger stake if valuation exceeds cap |
59| Discount Rate | Reduction from new investor price; rewards early risk |
60| Interaction | Cap and discount are **alternative** (not additive); investor gets better result |
61
62### Representations
63
64**Investor:**
65
66- [ ] Investment purpose (not for resale — supports private placement exemption)
67- [ ] Accredited status — individual (income/net worth) or entity (assets/equity owner/institutional)
68- [ ] Risk acknowledgments: speculative, total loss, illiquid, indefinite hold
69- [ ] Sophistication or qualified advisors
70
71**Company:**
72
73- [ ] Valid incorporation and good standing
74- [ ] Corporate power and authority
75- [ ] Board/stockholder approvals obtained
76- [ ] Binding obligation (standard bankruptcy/equitable exceptions)
77- [ ] No conflict with charter, material contracts, or law
78
79### Rights & Restrictions
80
81**Pre-conversion** — no stockholder rights (no voting, dividends, distributions, preemptive rights).
82
83**Transfer** — no transfer without written consent; unauthorized = void. Optional exceptions for affiliates, estate planning, retirement accounts.
84
85**Securities** — unregistered; restrictive legends required; investor acknowledges illiquidity.
86
87### Administrative Provisions
88
89| Provision | Standard |
90|---|---|
91| Governing law | State of incorporation or principal place of business |
92| Disputes | Litigation venue OR arbitration (rules, count, seat, costs) |
93| Amendments | Written, signed by both parties |
94| Waivers | Explicit, written; no implied waiver |
95| Integration | Entire agreement; supersedes prior negotiations |
96| Notices | Email, certified mail, or courier; specify addresses; deemed-received rules |
97| Severability | Reform invalid provisions; remainder survives |
98
99### Signature Blocks
100
101Both Company and Investor: signature, printed name, title (entities), date.
102
103## Checks
104
1051. **Defined terms** — capitalize consistently; define before first use
1062. **Math precision** — conversion formulas unambiguous to any financial professional
1073. **Cross-references** — verify all internal section references
1084. **No placeholders** — replace all `[brackets]` before finalizing
1095. **YC compatibility** — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations
1106. **Securities exemptions** — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements
1117. **MFN conflicts** — check prior SAFEs for MFN clauses that could trigger
1128. **Missing info** — identify gaps and request from user before finalizing
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