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---56# Simple Agreement for Future Equity (SAFE)78Drafts a SAFE granting investors future equity rights upon triggering events — no immediate ownership, no debt.910## Quick Start1112Gather before drafting:13141. **Company** — legal name per certificate of incorporation, jurisdiction, state of formation152. **Investor** — legal name, entity type, accredited investor basis163. **Economics** — purchase amount, valuation cap, discount rate (if any)174. **Cap table** — existing SAFEs, convertible notes, fully-diluted share count185. **Special terms** — MFN clause, pro rata rights, side letters1920## Document Structure2122### Header & Recitals2324| 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 |3031### Conversion Mechanics3233Three triggering events:3435**1. Equity Financing (automatic)**3637- Converts into preferred stock of same series issued to new investors38- Conversion price = lesser of:39 - **Cap price**: Valuation Cap ÷ Pre-money fully-diluted capitalization40 - **Discount price**: Price per share × (1 − Discount Rate)41- Shares = Purchase Amount ÷ Conversion Price42- Include worked numerical example4344**2. Liquidity Event (acquisition/merger/IPO)**4546- Investor elects: cash = Purchase Amount OR common stock = Purchase Amount ÷ Liquidity Price47- Specify election timeline and default4849**3. Dissolution**5051- Cash = Purchase Amount, pre-dissolution52- Priority: senior to common, subordinate to creditors/debt5354### Valuation Terms5556| 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 |6162### Representations6364**Investor:**6566- [ ] 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 hold69- [ ] Sophistication or qualified advisors7071**Company:**7273- [ ] Valid incorporation and good standing74- [ ] Corporate power and authority75- [ ] Board/stockholder approvals obtained76- [ ] Binding obligation (standard bankruptcy/equitable exceptions)77- [ ] No conflict with charter, material contracts, or law7879### Rights & Restrictions8081**Pre-conversion** — no stockholder rights (no voting, dividends, distributions, preemptive rights).8283**Transfer** — no transfer without written consent; unauthorized = void. Optional exceptions for affiliates, estate planning, retirement accounts.8485**Securities** — unregistered; restrictive legends required; investor acknowledges illiquidity.8687### Administrative Provisions8889| 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 |9899### Signature Blocks100101Both Company and Investor: signature, printed name, title (entities), date.102103## Checks1041051. **Defined terms** — capitalize consistently; define before first use1062. **Math precision** — conversion formulas unambiguous to any financial professional1073. **Cross-references** — verify all internal section references1084. **No placeholders** — replace all `[brackets]` before finalizing1095. **YC compatibility** — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations1106. **Securities exemptions** — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements1117. **MFN conflicts** — check prior SAFEs for MFN clauses that could trigger1128. **Missing info** — identify gaps and request from user before finalizing
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