A SAFE is an investment contract, created by Y Combinator in 2013, where an investor gives a startup cash now in exchange for the right to receive equity later, typically when the company raises a priced round, without setting a valuation up front.
A SAFE isn't debt. It doesn't accrue interest and it doesn't have a maturity date the way a convertible note does, which is a big part of why early-stage rounds moved toward it: fewer terms to negotiate, faster to close. What it does carry is a valuation cap and/or a discount rate, and that's what determines the price it converts at once a priced round actually happens.
The part that catches founders off guard later is stacking. Every SAFE outstanding converts at the next priced round, and multiple SAFEs at different caps can add up to more dilution than the founder tracked in their head. Modeling out what a whole stack of SAFEs actually converts to, not just what each one felt like at the time, is the kind of math a cap table has to answer.
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