If you're involved in the start-up space, you've likely
heard the term "safe". A Simple Agreement for Future
Equity, more commonly referred to as a SAFE, was introduced by Y
Combinator in 20131 as a cost-effective, simple and
quick method for start-ups to raise capital. While SAFEs have yet
to become as popular in Canada as they are south of the border,
they are emerging as an alternative to more traditional forms of
early-stage financing, such as convertible notes or preferred
shares.
The Basics:
A SAFE is a convertible security that typically does not have a
debt component or an expiration/maturity date (i.e. no obligation
to repay). Investors who participate in a SAFE are acquiring an
option to convert their investment into the company's shares at
a later date when a pre-determined event occurs. This conversion
event usually happens when the company completes an equity
financing for a negotiated aggregate proceeds amount. To motivate
investors to invest in a
