An agreement known as a Simple Agreement for Future Equity (SAFE) serves as a contractual arrangement between an investor and a company. It bestows upon the investor certain rights pertaining to future equity in the company, resembling those provided by warrants. However, unlike warrants, this agreement does not establish a specific price per share during the initial investment phase. Instead, once there is an occurrence of either a priced round of investment or liquidity event, the SAFE investor will be entitled to receive their future shares. The purpose behind SAFEs is to offer startups an uncomplicated mechanism for seeking initial funding that differs from convertible notes. In 2013, Y Combinator introduced this innovative instrument called SAFE (simple agreement for future equity), which has since gained widespread usage among YC startups as well as numerous non-YC startups engaged in early-stage fundraising endeavors.
