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Fundraising

SAFE Agreement Template

The Simple Agreement for Future Equity is the standard instrument for pre-seed and seed fundraising. Here’s everything you need to understand it, pick the right variant, and avoid common mistakes.

Which SAFE should you use?

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Post-Money SAFEMost Common

The investor's ownership percentage is fixed at the time of signing. The valuation cap is the post-money valuation, so the math is simple: investment amount ÷ valuation cap = ownership percentage.

Best for: Default choice for most seed rounds. Simple, founder-friendly, and the standard since 2018.

Post-Money SAFE with MFNEarly Rounds

Most Favored Nation clause. If the company later issues SAFEs on better terms (lower cap, discount), this investor automatically gets the better deal.

Best for: First checks in when you haven't set a valuation cap yet. Protects early believers.

Post-Money SAFE with Pro RataInvestor-Friendly

Includes a pro rata side letter giving the investor the right (not obligation) to invest their proportional share in the next priced round.

Best for: When an investor wants to maintain ownership in future rounds. Common ask from active seed funds.

Key terms explained

Valuation Cap
The maximum valuation at which the SAFE converts to equity. If the priced round valuation is higher, the SAFE investor converts at the cap - getting more shares for their money.
Discount Rate
A percentage discount on the priced round share price. Typically 10–20%. The investor gets whichever method (cap or discount) gives them a lower price per share.
Post-Money vs Pre-Money
Post-money SAFEs include the SAFE investment in the valuation cap. Pre-money SAFEs don't - meaning founder dilution isn't known until the round closes. Post-money is now standard.
Conversion Trigger
SAFEs convert on a qualified equity financing (priced round), liquidity event, or dissolution. They don't have maturity dates or interest - they're not debt.
Pro Rata Rights
The right to invest in future rounds to maintain ownership percentage. Usually granted via a separate side letter, not in the SAFE itself.
MFN (Most Favored Nation)
If the company issues later SAFEs with better terms, the MFN holder can adopt those terms. Used when the cap isn't set yet.

Common pitfalls

1
Stacking SAFEs without tracking dilution
Each post-money SAFE has a fixed ownership claim. Issuing too many SAFEs before a priced round can leave founders with surprisingly little equity. Model it.
2
Mixing pre-money and post-money SAFEs
Different math, different dilution outcomes. Pick one framework and stick with it for the entire round.
3
Ignoring the option pool shuffle
Priced rounds typically expand the option pool before conversion. This dilutes everyone - including SAFE holders - but founders bear the brunt if the pool is too large.
4
No cap on an uncapped SAFE
An uncapped SAFE with only a discount gives the investor equity at whatever the priced round valuation is, minus the discount. If your valuation jumps, the investor gets a great deal with minimal risk.