A SAFE (simple agreement for future equity) is a standardized document used by startup companies for early-stage fundraising. A SAFE investment may convert to equity in the company in a future round of fundraising (Series A, for example) and does not give a SAFE investor a specific number of shares at the time of the investment. The price of shares owned by a SAFE investor are determined in the future round of fundraising.
The terms of a SAFE are intended to be balanced between the interests of the investors, and the founders or existing owners of the company, but a SAFE may not be appropriate for every early-stage company or investor.
The SAFE was created by Y Combinator, a well-known tech accelerator, in 2013.
In Texas, as in other states, a SAFE (simple agreement for future equity) is a financial instrument used by startups during early-stage fundraising. It allows investors to convert their investment into equity at a later date, typically during a future equity financing round such as Series A. The SAFE is not a debt instrument and does not provide investors with immediate equity or a promise of a specific number of shares. Instead, the number of shares and the price per share are determined during a subsequent financing round based on the terms set forth in the SAFE agreement. The use of SAFEs is subject to general contract law and securities regulations. Founders and investors in Texas should ensure that their SAFE agreements comply with federal securities laws and any relevant state securities regulations. It is advisable for parties involved in a SAFE investment to consult with an attorney to ensure that the agreement is fair, balanced, and appropriate for their specific situation, and that it adheres to all applicable laws and regulations.
