Y Combinator, one of the most famed Silicon Valley startup accelerators, introduced the “Simple Agreement for Future Equity” (commonly referred to as the “SAFE”) in late 2013. Recognized within the early investment community for its efficiency, the SAFE serves as a prominent tool for early-stage financing in startups. As its name suggests, the SAFE empowers investors to secure ownership in a startup at a future date in exchange for a capital injection into the company at present. The number of shares investors will ultimately receive through a SAFE hinges on either the share price established in the company’s next round of financing (referred to as an “Equity Financing”) or a predetermined valuation cap agreed upon by the investor and the company, outlined in the SAFE itself as the “Valuation Cap”.
