A SAFE is a convertible loan without the debt element.

Under a SAFE, an investor agrees to make a cash payment to a company in exchange for a contractual right to convert that amount into shares when a pre-agreed trigger event occurs.  The trigger event is usually the closing of an equity raising or other liquidation event.

The number of shares the investor receives on conversion depends on the amount of the upfront cash payment and the share price of the priced equity round or the liquidation event (as applicable).

As with convertible notes, the startup will issue shares at a discount to the share price of the equity round or liquidation event to reward the investor for backing the company early.  The discount price generally refers to the price per share of the equity or liquidation event multiplied by the discount rate.

Our team has advised numerous clients on SAFE notes - both those seeking to raise money, and those seeking to invest.

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