Are you a startup in its early stage? Do you need to raise funds? Is the value of your company not yet determined? If your answer to any of these questions is yes, then a SAFE maybe appropriate for you.

We have highlighted below some salient points on raising funds for a business in its early stage using a Simple Agreement for Future Equity (SAFE).

“SAFE” is an acronym for the word, Simple Agreement for Future Equity. A SAFE is a quick and easy to negotiate agreement that enables a Startup to receive immediate funds from investors (SAFE investors) in exchange for future shares in the company at apriced financing round e.g. Series A funding.

❑  It is simple to negotiate.

❑  It involves low transaction costs (including legal fees).

❑  The investor gets to acquire shares in the Startup at a discounted rate in the future,when the shares are properly valued.

❑  It reduces the pressure on an early stage Startup to place a      spurious value on its shares.

❑  On the basis that the SAFE investor is exposed to more risks by investing in an early stage Startup, the SAFE investor may request to enjoy similar benefits as a future investor.

❑  It is preferable to a convertible note because there is no pressure to convert to shares at an agreed maturity date.

Typically, the investor will have a right to claim back the invested sum upon certain triggers such as a threatened liquidation or a material adverse change in the business.