A simple investment instrument where an investor gives money now in exchange for the right to receive equity in a future priced round.
A SAFE (Simple Agreement for Future Equity) is an investment document developed by Y Combinator in 2013. An investor gives a startup money now, and in exchange, gets the right to receive equity when the company later raises a priced round (like a Series A). The SAFE isn't equity itself — it's a promise of future equity. It converts into preferred stock at the price set in the priced round, typically with a discount or valuation cap (or both) that rewards the investor for the early risk.
SAFEs are popular for pre-seed and seed fundraising because they're simple, cheap to execute (no lawyers setting complex terms), and fast. They don't set a current valuation for the company, which avoids a difficult negotiation at a stage when valuation is speculative. The tradeoff is that investors don't immediately own equity — they hold an instrument that converts later.
There are several SAFE variants, most commonly post-money SAFEs (which specify ownership percentage in a way that's clear to both sides) and pre-money SAFEs (older version, now less commonly used for new raises). Key terms to understand: the valuation cap sets the maximum valuation at which the SAFE converts; the discount rate gives investors equity at a lower price than new investors in the priced round.