SAFEs (Simple Agreements for Future Equity) have become the standard fundraising instrument for early-stage startups. But many founders don’t fully understand how they work, which can lead to costly mistakes.
This guide explains SAFEs from the ground up: what they are, how they convert, and how valuation caps and discounts affect your dilution. We compare SAFEs to convertible notes and explain when each instrument makes sense.
We cover the key differences between pre-money and post-money SAFEs, the implications of each for founder dilution, and how to model multiple SAFEs with different terms on your cap table.
The guide includes worked examples showing exactly how conversion works in different scenarios, plus a checklist of terms to negotiate and red flags to watch out for.