To fill out a SAFE form, download the correct Y Combinator post-money template for your deal, complete five specific blanks (company legal name, investor legal name, purchase amount, valuation cap, and/or discount rate), have both parties sign electronically, collect the investor’s wire, and then file a Form D with the SEC within 15 days along with any required state notices. The Simple Agreement for Future Equity is a one-page contract Y Combinator introduced in late 2013, and the templates are free to download from the YC documents page.1Y Combinator. YC Safe Financing Documents The document itself is short. Getting the numbers right and handling the paperwork that follows is the part that trips founders up.
Pick the Right Template First
Y Combinator publishes three post-money SAFE templates for U.S. companies. Which one you use depends entirely on what you and the investor agreed to economically.1Y Combinator. YC Safe Financing Documents
- Valuation Cap, no Discount. The most commonly used version. It sets a ceiling on the price at which the SAFE converts in a future priced round. If the company’s valuation at that round comes in below the cap, the investor converts at the lower price instead.
- Discount, no Valuation Cap. The investor gets shares at a percentage discount to whatever price new investors pay at the next round. No ceiling on valuation.
- Uncapped MFN. No cap and no discount of its own. It carries a Most Favored Nation provision that automatically upgrades the SAFE to match better terms the company offers to any later SAFE investor. Useful when you want to close money before setting a cap.
Some older references describe a fourth template combining a valuation cap and a discount. Y Combinator’s current document library does not include that combination for U.S. companies. If your deal needs both, you are modifying the standard form, and a startup attorney should review the edits before anyone signs.
The Blanks You Fill In
The template has only a handful of fields. Because this is a binding securities contract rather than a term sheet, every entry needs to be exact.
- Company name. Use the full legal entity name exactly as it appears on your certificate of incorporation. “Acme Technologies, Inc.” — not “Acme” or “Acme Tech.”
- Investor name. The full legal name of the individual or entity investing. If the investor is a fund or an LLC, use the entity name, not the managing partner’s personal name.
- Purchase Amount. The exact dollar figure the investor will wire. Not a range and not a target. A specific number.
- Valuation Cap. Required on the valuation cap template. Enter the agreed-upon dollar figure. Under the post-money SAFE, this number represents the company’s implied total value including the SAFE money itself.
- Discount Rate. Required on the discount template. Enter it as a percentage. 80 percent means the investor pays 80 percent of the price new investors pay, which is a 20 percent discount.
The rest of the document is standardized language that Y Combinator has drafted and refined. Most founders and investors sign the template unmodified, which is the point of using a standard form. Any change to the boilerplate — a board seat, an adjusted definition of “Equity Financing,” a tweak to the liquidation waterfall — moves you into custom territory and warrants legal review.
Setting the Valuation Cap Number
The post-money structure lets you calculate ownership directly. Divide the investment amount by the post-money valuation cap. A founder targeting a $1 million raise who wants to sell roughly 15 percent of the company sets the post-money cap around $6.7 million, because $1,000,000 divided by $6,700,000 is approximately 15 percent.2Y Combinator. Safe User Guide
If you raise less than planned under the same cap, the investor simply gets a smaller slice. $500,000 on a $6.7 million cap yields about 7.5 percent rather than 15 percent.2Y Combinator. Safe User Guide
Where founders get in trouble is signing multiple SAFEs at different caps without modeling the combined effect. Each SAFE’s ownership percentage is calculated independently against its own cap. Raise $500,000 on a $5.5 million cap and another $500,000 on an $8.3 million cap, and you have sold about 9 percent to the first investor and 6 percent to the second — roughly 15 percent total.2Y Combinator. Safe User Guide Model the cumulative dilution from every outstanding SAFE before you sign any new one.
Signing and Collecting the Money
Once the blanks are complete, the company (typically a founder or CEO) and the investor both sign. Electronic signatures are enforceable for this kind of commercial agreement under the federal Electronic Signatures in Global and National Commerce Act, which provides that a contract cannot be denied legal effect solely because an electronic signature was used in its formation.3Office of the Law Revision Counsel. 15 US Code Chapter 96 – Electronic Signatures in Global and National Commerce Platforms like DocuSign or Dropbox Sign work well and create a timestamped audit trail.
After both signatures are in, the investor wires the purchase amount to the company’s business bank account. Confirm receipt, then send the investor a fully executed PDF. Save the final version somewhere your lawyer and your future Series A lead can access it easily. You will need it at conversion.
Legal fees on a straight SAFE round are modest because there is no stock purchase agreement, no investor rights agreement, and no board negotiation. Many founders close SAFE rounds without outside counsel when the template is unmodified. Skipping legal review on a modified SAFE or a complex multi-investor round tends to create conversion problems later that cost far more to fix than the initial attorney fees would have been.
Filings You Owe After Signing
A SAFE is a security. Issuing one triggers federal and state filing obligations that get missed more often than they should.
Form D With the SEC
Most SAFE transactions rely on the private offering exemption under Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving a public offering.4Office of the Law Revision Counsel. 15 US Code 77d – Exempted Transactions In practice, companies structure the offering under Rule 506(b) of Regulation D, which provides a safe harbor with clear compliance standards.5U.S. Securities and Exchange Commission. Private Placements – Rule 506(b)
After the first SAFE in the round is signed and funded, the company must file Form D with the SEC within 15 calendar days. The date of first sale is the date the first investor becomes irrevocably committed to invest.6U.S. Securities and Exchange Commission. Frequently Asked Questions and Answers on Form D There is no SEC filing fee. Filing is electronic through EDGAR.7U.S. Securities and Exchange Commission. Filing a Form D Notice If the deadline lands on a weekend or holiday, it shifts to the next business day.
State Blue Sky Notices
Federal preemption under Rule 506 stops states from requiring you to register the offering, but most states still require a notice filing and a fee in each state where a SAFE investor resides. Fees generally run from a few hundred to over a thousand dollars per state. Missing a required notice filing can lead a state securities regulator to suspend the offering or revoke the company’s ability to operate in that state. A startup attorney or a compliance service can handle these once the Form D is filed.
Confirming Accredited Status
Under Rule 506(b), the company must have a reasonable belief that each SAFE investor qualifies as an accredited investor. For individuals, the SEC defines this as net worth exceeding $1 million excluding the primary residence, or annual income exceeding $200,000 individually ($300,000 with a spouse or partner) for the prior two years with a reasonable expectation of the same in the current year.8U.S. Securities and Exchange Commission. Accredited Investors For entities, the threshold is generally $5 million in investments or assets. Rule 506(b) does not require formal verification documents, but keep a record of why you believed the investor qualified. A self-certification questionnaire is usually enough.9U.S. Securities and Exchange Commission. Assessing Accredited Investors Under Regulation D
If You’re Also Granting Pro-Rata Rights
Pro-rata rights are not in the SAFE itself. If you want to give an investor the right to buy their proportional share of preferred stock in the next equity round, use Y Combinator’s separate Pro Rata Side Letter, downloaded from the same documents page and executed alongside the SAFE.1Y Combinator. YC Safe Financing Documents An investor holding SAFEs representing 15 percent of the company at conversion would be entitled to purchase up to 15 percent of the new shares in that round.10Y Combinator. Pro Rata Side Letter Not every investor gets one. Founders typically reserve pro-rata side letters for larger checks or strategically important investors.
Put the SAFE on the Cap Table Immediately
Every outstanding SAFE should appear on the company’s capitalization table as a convertible instrument from the day it is funded. Treating SAFEs as informal handshake deals and skipping the cap table update creates a trap for later. When the Series A arrives and every SAFE converts at once, actual founder ownership can come in far below what founders assumed if multiple SAFEs at different caps were never modeled together. Build a pro forma cap table that shows the ownership picture after all SAFEs convert at various hypothetical round prices. A cap table tool automates this, but a spreadsheet works if the formulas are correct. The point is to know exactly how much of the company you have sold before you sit down at the term sheet.