Overview of SAFE

What is this document?

The SAFE (Simple Agreement for Future Equity) is an agreement allowing a Company to raise equity from Investor(s).

When would I use this document?

The SAFE is used to set out the terms of a transaction where a company wishes to raise equity capital immediately and defer the issuance of shares to the investor until some later date. The investor typically receives the future shares when a priced investment round occurs or there is a liquidation event. A SAFE is not intended to be a debt instrument, it is an alternative to a convertible note that can be beneficial to both parties.

Who signs this Agreement?

This document is signed by the Company and the Investor(s).

More details about this document

A SAFE can vary in length from one to several pages depending on how many terms the parties wish to address.

What are the core elements of this document?

The core elements of this document are:

  • Parties;
  • Definition of the Investment;
  • Valuation; Use of Proceeds;
  • Closing Date; and
  • Termination.

Additional elements could include:

  • Confidentiality;
  • Due Diligence;
  • Governing Law;
  • Agreement to be Bound; and
  • Representations, Warranties and Covenants.

Related Documents

Letter of Intent - a document outlining the terms of a proposed investment

Subscription Agreement - an agreement for the purchase of shares between a person buying shares and the corporation issuing the shares

Written by Chris.