contracts
SAFE Note Template and How to Draft One (2026)
What is a SAFE note, and when do you use one? A SAFE, short for Simple Agreement for Future Equity, is an instrument an early-stage startup uses to raise money quickly from an investor without setting a share price yet. The investor pays now; in return they get the right to shares later, when the company raises a priced equity round. A SAFE is not a loan: it has no interest rate and no maturity date, so nothing has to be repaid on a fixed date. It was created by the accelerator Y Combinator and is popular because it is short and avoids negotiating a valuation at the earliest stage. Below is a plain SAFE-style template you can adapt, followed by how to fill each term. Read the India caveat at the end first if your company is incorporated in India, because a standard US SAFE usually cannot be used there as-is. This is general information, not legal or financial advice; use a qualified startup lawyer before you sign. ## A SAFE note template ```
SIMPLE AGREEMENT FOR FUTURE EQUITY Company: [COMPANY LEGAL NAME], [registration / address] ("Company") Investor: [INVESTOR LEGAL NAME], [address] ("Investor") Date: [DATE] Investment Amount: [CURRENCY] [AMOUNT] (the "Purchase Amount") 1. THE INVESTMENT In exchange for the Purchase Amount, the Company issues the Investor the right to receive shares on the terms below. This instrument is not a debt; it carries no interest and has no maturity date. 2. CONVERSION ON AN EQUITY FINANCING If the Company raises a priced equity round (an "Equity Financing"), this SAFE converts into shares of that round. The number of shares is the Purchase Amount divided by the Conversion Price. The Conversion Price is the LOWER of: (a) the price per share set by: [Valuation Cap: CURRENCY [AMOUNT]] applied to the company's capitalisation; and (b) the Equity Financing price per share less the [Discount: N%] discount. State whether the Valuation Cap is applied on a PRE-MONEY or a POST-MONEY basis: [PRE-MONEY / POST-MONEY]. 3. CONVERSION ON A LIQUIDITY EVENT If the Company is sold or goes public before this SAFE converts, the Investor may choose to receive EITHER the Purchase Amount back OR the shares the SAFE would convert into, whichever the Investor prefers. 4. DISSOLUTION If the Company winds up before conversion, the Investor is entitled to the Purchase Amount back, ranking ahead of ordinary shareholders and behind creditors, to the extent funds are available. 5. PRO-RATA RIGHT [OPTIONAL] The Investor may invest further to maintain their percentage in the next priced round, up to [SCOPE]. 6. MOST FAVOURED NATION [OPTIONAL] If the Company issues a later SAFE on better terms before this one converts, the Investor may elect those better terms. 7. REPRESENTATIONS Each party has the authority to enter this agreement. The Investor is acquiring the right for its own account and meets any applicable investor-eligibility rules. 8. GOVERNING LAW This agreement is governed by the laws of [JURISDICTION]; disputes are resolved in [courts of [PLACE] / arbitration seated in [PLACE]]. SIGNED: Company: ______________________ Date: __________ Investor: _____________________ Date: __________
Frequently asked questions
- Is a SAFE note debt or equity?
- Neither exactly. A SAFE is not debt: it carries no interest and no maturity date, so nothing is repaid on a fixed schedule. It is a right to receive equity in the future, which converts into shares when the company raises a priced round or on a sale. Until then the investor holds a contractual right, not shares and not a loan.
- What is the difference between a valuation cap and a discount?
- A valuation cap sets the maximum company valuation used to price the investor's shares at conversion, so a lower cap gives the investor more shares. A discount gives the investor a percentage off the price paid in the priced round. A SAFE can have one or both; where it has both, the investor converts at whichever gives the lower price.
- Can an Indian startup use a standard US SAFE?
- Usually not without changes. Indian company law and foreign-exchange rules do not recognise the US SAFE as an instrument, so Indian startups use structures such as compulsorily convertible preference shares or debentures, or an India-specific adaptation often called an iSAFE. If a foreign investor is involved, FEMA pricing and reporting rules apply. Take advice from an Indian startup lawyer; this is general information, not legal advice.
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