All terms
Fundraising
SAFE note
Simple Agreement for Future Equity — an investment instrument that converts to equity at a future priced round, used widely at pre-seed.
In plain English
A way to take investor money now without setting a valuation. The investor's money converts to shares the next time you raise a priced round, usually with a cap and/or discount.
Example
Investor puts $100k in a $5M-cap SAFE. Company raises a $20M-pre-money seed round; the SAFE converts at the $5M cap, giving the investor a much bigger stake than the new investors.
Why it matters
SAFEs are fast and cheap to sign. Stacked badly, they can produce dilution surprises later. Always model conversion before signing each one.
Common mistakes
- Signing multiple uncapped SAFEs (no idea what they'll convert to)
- Treating SAFEs as 'free money' — they're a real dilution hit at the next round
- Not modelling the option-pool refresh that happens alongside conversion