SAFE is an instrument that allows a company to issue shares to an investor for money invested on the occurrence of a predetermined trigger event.
Most startups need to raise money soon after formation to fund operations. Unlike traditional priced rounds, a company can issue a SAFE quickly and efficiently, without multiple documents. It’s a flexible, one-document security, without numerous terms to negotiate, saving companies and investors money and time.
Here, the investor and company agree on a cap on valuation, sign and date a SAFE, and the investor sends the company the investment amount. An outstanding SAFE is present on the company’s cap table, like any other convertible security (such as a warrant or an option).