SAFE (Simple Agreement for Future Equity)

Definition

A Stripe-era instrument designed to be even simpler than convertible notes—basically a promise to give equity someday, maybe.

Example Usage

We switched from convertible notes to SAFEs because our lawyer said it was simpler, which has turned out to be hilariously false.

Origin

Created by Y Combinator in 2013 as a simplification of convertible notes; has become increasingly complex.

Fun Fact

SAFEs technically aren't securities according to their creators, but the SEC hasn't officially weighed in yet.

Source: Y Combinator and modern startup financing practices

Related Terms

Beginner

up round

A financing round at a higher valuation than previous rounds, signaling growth and traction to the market. The opposite of a down round and considerably better for everyone's mood, if not always their long-term prospects.

🚀 Startup / VC

Intermediate

paper unicorn

A startup valued at over $1 billion that has never undergone the reality check of going public or getting acquired. Their unicorn status exists purely in the fantasy land of private market valuations.

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Stealth Mode

When a startup operates in secrecy to avoid competitors copying their idea, which assumes competitors would care about the idea in the first place. It's the startup equivalent of whispering at a party where nobody is listening.

🚀 Startup / VC

Advanced

sidecar fund

A supplemental investment vehicle created alongside a main fund to accommodate additional capital from LPs or special investors, often for a specific deal or opportunity too large for the main fund. The VC version of ordering extra fries because one serving isn't enough.

🚀 Startup / VC

Intermediate

triple down

When a VC aggressively increases their investment in a portfolio company across multiple rounds, betting their career on being right. Conviction investing taken to its logical extreme.

🚀 Startup / VC

Advanced

waterfall analysis

A spreadsheet model showing how acquisition proceeds flow to different shareholders based on liquidation preferences and other terms—usually revealing that founders get far less than their ownership percentage suggests. It's where equity dreams go to die.

🚀 Startup / VC

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