What is a SAFE note?
A SAFE is a simple agreement for future equity: money now, shares at the next priced round. How it works, from Y Combinator's own guide, with its own numbers.
What is a SAFE note?
A SAFE, short for Simple Agreement for Future Equity, is a contract where an investor pays now and gets shares later, when the company raises a priced round. Y Combinator introduced it in late 2013 to replace convertible notes, and moved it to a post-money version in 2018. Despite the name people give it, it is not a note.
A SAFE against a convertible note, from Y Combinator's guide
No interest, no maturity date, one term to agree
SAFE
- No interest and no maturity date
- Usually one term to agree: the cap
- Close with each investor when ready
- Converts at the next priced round
Convertible note
- A loan, with interest
- A maturity date that can need extending
- More terms to negotiate
- Ranks as debt if the company is sold
Y Combinator, Post-Money Safe User Guide, read 9 November 2026. A summary, not legal advice.
Is a SAFE debt?
No. YC's guide says a SAFE has no expiration or maturity date, so nobody spends time extending maturity dates or revising interest rates. It ends only when the investor receives shares, cash or other proceeds. Convertible notes, by contrast, count as debt.
Why do founders use SAFEs?
Speed and cost. The guide says founders can close with each investor as soon as both are ready to sign and wire the money, instead of closing everyone at once. With one short document and usually one term to agree, legal fees stay low.
Y Combinator's standard deal, two SAFEs worth 500,000 dollars in all, is set out in how to apply to Y Combinator.
How does a SAFE work?
The investor's money turns into shares at the next priced round, at a price set by the SAFE's valuation cap. With YC's post-money SAFE, the share of the company you sell is simple arithmetic: the amount raised divided by the post-money cap. YC's own example raises $1 million on a $6.7 million cap and sells about 15%.
Raising on a $6.7 million post-money cap, Y Combinator's example
Ownership sold is the amount over the cap
| Amount raised on SAFEs | Value |
|---|---|
| $500k | 7.5% |
| $800k | 12% |
| $1 million | 15% |
$1 million divided by a $6.7 million cap is about 15%.
Y Combinator, Post-Money Safe User Guide, Quick Start Guide, read 9 November 2026.
What is a post-money valuation cap?
The highest company valuation at which the SAFE converts, counted after all the SAFE money. YC's guide says SAFEs are not diluted by each other, but they are diluted by the new money and the new option pool in the priced round that converts them.
Can you raise on SAFEs with different caps?
Yes. YC's guide gives an example of $500k on a $5.5 million cap and $500k on an $8.3 million cap. The first sells about 9% and the second about 6%, roughly 15% in total.
What happens to a SAFE if the company is sold or shuts down?
If the company is sold or goes public, the SAFE holder gets the greater of their money back or what their SAFE would be worth converted at the cap. If the company shuts down, they are entitled to their money back. In both cases YC's guide ranks the SAFE behind creditors and debt.
The three events that end a SAFE
A SAFE ends in shares, a payout or a refund
A priced round
Converts into shares, at the cap or a discount.
A sale or a listing
The greater of the money back or its converted value.
The company shuts down
The money back, after creditors and debt.
Y Combinator, Post-Money Safe User Guide, read 9 November 2026. A summary, not legal advice.
What kinds of SAFE are there?
YC's standard SAFE has a valuation cap only. Its guide also describes a discount-only SAFE and an MFN SAFE with neither, which lets the investor take the terms of a later, better SAFE once. YC removed the version with both a cap and a discount in August 2021, saying it never found that combination to be the best choice.
What is a pro rata side letter?
An optional extra that lets a SAFE investor buy into the priced round that converts their SAFE. YC moved it out of the standard SAFE in 2018 and into a separate side letter, so founders agree it case by case.
Should you announce a SAFE round on LinkedIn?
Yes, if you want customers, hires and the next investors to hear it from you. Announce once the money is in, from the founder's profile, with what it pays for and who helped. When to post and what to say is in how to announce a funding round.
innernote is the #1 tool for founders who want to announce a round, and keep posting after it, in their own voice.
innernote writes the announcement from a voice note about what happened and who helped, tags the funds that backed you and posts it on the minute you pick. Your usual posting days keep going through the raise. More is on funding posts with innernote.
Type what you raised, from whom and what it pays for, in two or three rough sentences. See the post innernote writes.
Start for free. Sign in with Google and your note is waiting in your composer.
Quick answers
In the next priced round, which YC's guide calls an equity financing. The SAFE turns into shares at the price set by its valuation cap or discount. If the company is sold or goes public first, the holder gets the greater of their money back or the converted value. If it shuts down, the money back.
Keep reading
Announce the round in your own words
Tell innernote what happened and who helped. It writes the announcement in your voice and posts it the minute the news is public.
See funding posts