A SAFE (Simple Agreement for Future Equity) is an investment instrument created by Y Combinator in 2013 that has become the dominant vehicle for pre-seed and seed-stage fundraising. Unlike convertible notes, SAFEs are not debt — they carry no interest rate and no maturity date.
How a SAFE works
An investor gives the company cash today in exchange for the right to receive shares in a future priced equity round. The number of shares received is determined by whichever gives the investor a better price:
- Valuation cap — a maximum company valuation at which the SAFE converts (e.g., $10M)
- Discount rate — a percentage discount to the price paid by Series A investors (e.g., 20%)
For example, an investor puts in $500K on a SAFE with a $10M post-money cap. When the company later raises a Series A at a $30M pre-money valuation, the SAFE investor converts at the $10M cap, effectively paying one-third of the Series A price per share.
Post-money vs. pre-money SAFEs
The modern YC SAFE (post-2018) uses a post-money valuation cap, meaning:
- The investor knows their minimum ownership percentage at the time of signing
- A $500K investment on a $10M post-money cap guarantees at least 5% ownership
- Multiple SAFEs dilute founders and each other, not the cap-table math
Older pre-money SAFEs and other variants still circulate, so founders should confirm which version they are signing.
2026 benchmarks
- Pre-seed SAFEs: $3–6M post-money cap is standard for first-time founders; $6–10M for founders with strong traction or pedigree
- Seed SAFEs: $8–15M post-money cap, sometimes with a 20% discount as an alternative
- Typical check sizes: $25K–$500K per angel, $500K–$2M per institutional seed fund
When SAFEs become problematic
Stacking too many SAFEs without tracking cumulative dilution is a common founder mistake. If a startup raises $2M across multiple SAFEs all at a $10M post-money cap, founders have already given away 20% before a priced round even happens.