Safe

An acronym that stands for “Simple Agreement for Future Equity” Safe is a term initially coined by Y Combinator that describes short “open source” documents that have been drafted for use in early-stage private company financing deals. The purpose of Safes is to save founders and investors time and money. Safes are available on Cooley GO Docs (US and Singapore versions available). Source documents can be found on the Y Combinator website here.

Safes are set up to, among other things, convert into preferred stock in a future equity financing of the company. Depending on the form of Safe used, that conversion may be subject to conversion price discount and/or a conversion price cap. Some Safes do not include a discount or cap, but instead include a “most favored nation” clause that allows the Safe to piggyback onto the terms of other convertible instruments that the company issues in the future.