The Simple Agreement for Future Equity (SAFE) was created by Y Combinator in 2013 as a more founder-friendly alternative to convertible notes. Used predominantly in the United States startup ecosystem, SAFEs are particularly valuable for early-stage companies that need to raise capital quickly without establishing a valuation or negotiating complex terms. The agreement defines key conversion triggers, including equity financing rounds, liquidation events, and dissolution events, while maintaining compliance with U.S. securities regulations. SAFEs typically include provisions for valuation caps, discount rates, and most favored nation clauses, making them flexible instruments for both companies and investors.
Simple Agreement For Future Equity for the United States
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Key Requirements PROMPT example:
Simple Agreement For Future Equity
"I need a Simple Agreement for Future Equity (SAFE) for my Delaware-incorporated tech startup to raise $500,000 from an angel investor, with a $5M valuation cap and 20% discount rate, to be executed by March 2025."
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1. Parties: Identification of the company and investor(s)
2. Background: Context of the agreement and intention to provide investment rights
3. Definitions: Key terms including Equity Financing, Liquidity Event, Dissolution Event, and other relevant definitions
4. Investment Amount: Specified amount of investment and payment terms
5. Events: Treatment of Equity Financing, Liquidity Event, Dissolution Event, and Termination
6. Company Representations: Company's warranties and representations
7. Investor Representations: Investor's warranties and representations
8. General Provisions: Miscellaneous legal provisions including governing law, notices, and amendments
1. MFN Amendment Provision: Most Favored Nation clause, used when the company wants flexibility to offer different terms to future investors
2. Pro-rata Rights: Rights to participate in future financing rounds, used when granting investors rights to maintain ownership percentage
3. Information Rights: Rights to receive company information, used when granting investors additional information access rights
1. Cap Table: Current capitalization of the company
2. Form of Notice of Exercise: Template for exercising conversion rights
3. Disclosure Schedule: Additional disclosures and exceptions to representations
4. Valuation Cap Certificate: Details of the valuation cap calculation if applicable
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