How to Review a SAFE Note: A Clause-by-Clause Checklist

How do you review a SAFE note? Review a SAFE note by reading it term by term against a checklist and asking one question of each term: when this converts into shares, what does it do to my ownership? A SAFE looks short and friendly, but a few numbers (the valuation cap, the discount, and whether the cap is pre-money or post-money) decide how much of the company the investor ends up with and how much the founders give away. This checklist walks through each term, with the red flags to catch. It is written for both sides, with notes for founders and investors where their interests differ. This is general information, not legal or financial advice. For any real round, have a startup lawyer review the SAFE, and if the company is Indian, read the compliance check at the end first. ## 1. Parties and authority - Are the company and the investor named with full legal details?

• Does the company have the authority to issue the SAFE, and does its cap table have room? Red flag (founder): issuing SAFEs without tracking how many you have signed, so the total converts into far more equity than you expected. ## 2. Investment amount - Is the amount the investor pays clear and received before rights attach? Red flag: rights that attach before the money actually arrives. ## 3. Valuation cap - Is there a cap, and is the number one the founders can live with at the next round?
• Is it clear the cap is a ceiling on the conversion valuation, not the valuation itself? Red flag (founder): a cap set so low that conversion hands the investor a large slice of the company. Red flag (investor): no cap at all, so an up-round prices you out of the early risk you took. ## 4. Discount - Is there a discount, and is it in a normal range (commonly ten to twenty-five per cent)?
• If there is both a cap and a discount, is it clear the investor gets the lower price, not both stacked? Red flag: wording that lets an investor apply the cap and the discount together in a way neither side intended. ## 5. Pre-money versus post-money cap - Does the SAFE say plainly whether the cap is pre-money or post-money? Red flag (founder): a post-money cap signed without modelling it. Post-money caps fix the investor's percentage and push the dilution from later SAFEs onto the founders, so stacking several of them can dilute founders far more than expected. Model the full stack before signing. ## 6. Conversion mechanics - Is it clear what event triggers conversion (a priced equity round), and how the share number is calculated?
• What counts as a qualifying round, and is there a minimum size? Red flag: vague conversion wording that leaves room for argument about the share count when real money is on the table. ## 7. Liquidity and dissolution - If the company is sold before conversion, can the investor choose their money back or shares?
• On a wind-up, where does the investor rank? Red flag (founder): a payout on sale that behaves like a large multiple return, quietly turning a simple SAFE into an expensive preference. ## 8. Pro-rata and MFN rights - Is there a pro-rata right to invest in the next round, and is its scope reasonable?
• Is there a most-favoured-nation clause letting the investor take better terms you later give someone else? Red flag (founder): broad MFN and pro-rata rights across many investors that complicate the next priced round. ## 9. Representations and governing law - Are the representations limited and standard?
• Is the governing law and forum one both sides can realistically use? Red flag: heavy representations and warranties on a founder, which belong in a priced round, not an early SAFE. ## 10. The India compliance check - Is the company Indian, and if so, has the US SAFE been converted into a compliant instrument (such as compulsorily convertible preference shares or debentures, or an iSAFE)?
• If a foreign investor is involved, have FEMA pricing and reporting rules been considered? Red flag: an Indian company signing a raw US SAFE. It may not be a valid or enforceable instrument under Indian company and foreign-exchange law. This is the first thing to fix, not the last. ## What a SAFE does not settle It is worth knowing what a clean SAFE deliberately leaves out, so you are not surprised later. A standard SAFE does not give the investor a board seat, information rights, protective provisions or voting control; those are decided in the priced round the SAFE converts into. If an investor wants any of those now, they usually sit in a short side letter, which should be reviewed alongside the SAFE because its terms can matter as much as the SAFE itself. Founders should keep a running list of every SAFE and side letter signed, because the terms only reveal their full effect when they all convert together at the next round. ## A fast triage If you have ten minutes, check three things: the valuation cap, whether it is pre-money or post-money, and the discount. Those decide the economics. For an Indian company, add a fourth: is this a compliant instrument at all? Then scan for a side letter, because that is where extra rights hide. Everything else protects you at the edges, but these are the terms that change the deal. ## Where a contract workspace helps Reviewing one SAFE by hand is the easy case. The real work is handling every SAFE and side letter you sign and watching what the whole stack converts into once a priced round lands. Drafting a SAFE, reviewing its cap and discount, tracking each investor's rights and dates, and governing the growing stack can all live in one AI workspace tuned to how your company raises. Adira is one tool built on exactly that single place to work.