Forum Ventures reposted this
According to Carta, 93% all pre-seed rounds in Q2 were structured as Simple Agreements for Future Equity (SAFEs). So what exactly is a SAFE? A SAFE is a simple agreement for future equity. With a SAFE, an investor gives you capital today with the promise of getting equity in the future when a conversion event occurs, like raising a priced round. Carolyn Levy, a former partner and lawyer at Y Combinator, invented the SAFE in 2013 as a cleaner alternative to convertible notes (which are debt instruments that accrue interest and require hefty legal docs just to raise often small amounts of early capital). There are some huge pros: → Close capital quickly (in days, not weeks) → Standard document = minimal legal work and fees → You can raise rolling tranches from different investors But also things to be aware of: → Multiple tranches at different valuations = messy cap table → Uncapped SAFEs or discounts can dilute you way more than you expect → If the market shifts, conversion terms can get ugly SAFEs are great for raising small amounts from believers early on, and ultimately the structure you pick matters less than understanding the implications! Happy Fundraising :) 💜