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name: safe-agreement language: en description: Drafts Simple Agreements for Future Equity (SAFE) for early-stage venture capital financing with valuation cap/discount mechanics, investor qualifications, and securities compliance. Use when drafting SAFEs, pre-seed investment documents, convertible equity instruments, or YC-style SAFE notes. tags:

• agreement
• corporate
• drafting

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Simple Agreement for Future Equity (SAFE)

Drafts a SAFE granting investors future equity rights upon triggering events — no immediate ownership, no debt.

Quick Start

Gather before drafting:

1. Company — legal name per certificate of incorporation, jurisdiction, state of formation
2. Investor — legal name, entity type, accredited investor basis
3. Economics — purchase amount, valuation cap, discount rate (if any)
4. Cap table — existing SAFEs, convertible notes, fully-diluted share count
5. Special terms — MFN clause, pro rata rights, side letters

Document Structure

Header & Recitals

Element	Requirement
Company ID	Full legal name matching certificate of incorporation, entity type, jurisdiction
Investor ID	Legal name, entity type, capacity to contract
Purchase amount	Exact dollar figure
Core exchange	Capital → contractual right to future equity; state explicitly: no debt, no interest, no current stockholder status

Conversion Mechanics

Three triggering events:

1. Equity Financing (automatic)

• Converts into preferred stock of same series issued to new investors
• Conversion price = lesser of:
  • Cap price: Valuation Cap ÷ Pre-money fully-diluted capitalization
  • Discount price: Price per share × (1 − Discount Rate)
• Shares = Purchase Amount ÷ Conversion Price
• Include worked numerical example

2. Liquidity Event (acquisition/merger/IPO)

• Investor elects: cash = Purchase Amount OR common stock = Purchase Amount ÷ Liquidity Price
• Specify election timeline and default

3. Dissolution

• Cash = Purchase Amount, pre-dissolution
• Priority: senior to common, subordinate to creditors/debt

Valuation Terms

Term	Function
Valuation Cap	Ceiling on conversion valuation; larger stake if valuation exceeds cap
Discount Rate	Reduction from new investor price; rewards early risk
Interaction	Cap and discount are alternative (not additive); investor gets better result

Representations

Investor:

• Investment purpose (not for resale — supports private placement exemption)
• Accredited status — individual (income/net worth) or entity (assets/equity owner/institutional)
• Risk acknowledgments: speculative, total loss, illiquid, indefinite hold
• Sophistication or qualified advisors

Company:

• Valid incorporation and good standing
• Corporate power and authority
• Board/stockholder approvals obtained
• Binding obligation (standard bankruptcy/equitable exceptions)
• No conflict with charter, material contracts, or law

Rights & Restrictions

Pre-conversion — no stockholder rights (no voting, dividends, distributions, preemptive rights).

Transfer — no transfer without written consent; unauthorized = void. Optional exceptions for affiliates, estate planning, retirement accounts.

Securities — unregistered; restrictive legends required; investor acknowledges illiquidity.

Administrative Provisions

Provision	Standard
Governing law	State of incorporation or principal place of business
Disputes	Litigation venue OR arbitration (rules, count, seat, costs)
Amendments	Written, signed by both parties
Waivers	Explicit, written; no implied waiver
Integration	Entire agreement; supersedes prior negotiations
Notices	Email, certified mail, or courier; specify addresses; deemed-received rules
Severability	Reform invalid provisions; remainder survives

Signature Blocks

Both Company and Investor: signature, printed name, title (entities), date.

Checks

1. Defined terms — capitalize consistently; define before first use
2. Math precision — conversion formulas unambiguous to any financial professional
3. Cross-references — verify all internal section references
4. No placeholders — replace all [brackets] before finalizing
5. YC compatibility — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations
6. Securities exemptions — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements
7. MFN conflicts — check prior SAFEs for MFN clauses that could trigger
8. Missing info — identify gaps and request from user before finalizing