What is a SAFE Note?
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What is a SAFE Note?

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Catherine Daly
Content Strategist
Photo by Viktor Forgacs on Unsplash

A SAFE (simple agreement for future equity) note is a simpler alternative to a convertible note, allowing startups to structure seed investments without interest rates or maturity dates.

The note is not debt. It is simply a legal contract that allows the investor to buy shares at the lower of the valuation cap or the price of the future round. The valuation cap is the only negotiable detail.



Simplicity: At just 5 pages long, a SAFE note is simpler than a convertible note. It is straightforward with clear upsides and downsides.

Less to negotiate: Unlike other investments, SAFE notes do not require much negotiation. 

Ease of accounting: Like other convertible securities, SAFE notes end up on a company’s capitalization table.

Flexibility for startups: The lack of pre-defined terms and maturity date gives the startup more freedom.


Incorporation requirement: A company must be incorporated to offer SAFE notes—many startups are limited companies. 

Lack of familiarity: SAFE notes are relatively new, which means lawyers and investors have less experience with them. 

Fair valuation expenses: SAFE notes may trigger the need for a fair valuation (409a). A company may need to allocate funds for this, leaving less available for product development.

No minimum requirement: There is no minimum requirement for an equity round to go into conversion. 

Dilution: Many founders don’t think about the potential impact that these notes may have on the valuation of the business in the future.

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Catherine Daly
Content Strategist

Catherine joined TIMIA Capital as a freelance copywriter and social media manager in January 2019. She has 15 years experience in marketing and held senior positions at a number of technology companies including Hootsuite, Absolute, and Avnet Technology Solutions. Catherine is an expert writer and marketer and holds an executive Masters in Marketing, a Bachelor of Science in Communications and Journalism, and a Diploma in Digital Marketing.