Adam Frankel
General Counsel · Technology & AI
15+ years as General Counsel to technology, cloud & AI companies
Safe: Valuation Cap, No Discount (Canada) by Y Combinator
The Y Combinator SAFE: Valuation Cap, No Discount (Canada) governs how investor funds convert into equity based on a pre-set post-money valuation cap, without applying a discount. It ensures that the investor receives shares at a price reflecting the valuation cap if a future financing, liquidity event, or dissolution occurs. This SAFE is part of Y Combinator’s library of open, lawyer-vetted standard financing documents adapted for Canadian securities law.
SAFE (Simple Agreement for Future Equity)
THIS INSTRUMENT AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES OF AMERICA SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED IN THIS SAFE AND UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) THE DATE OF ISSUANCE OF THIS SECURITY OR (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
THIS CERTIFIES THAT in exchange for the payment by [Investor Name] (the “Investor”) of [Purchase Amount] (the “Purchase Amount”) on or about [Effective Date], a corporation organized under the laws of [Company Jurisdiction] (the “Company”), hereby issues to the Investor the right to certain of the Company’s Capital Shares, subject to the terms described below.
This Safe is one of the forms available at http://ycombinator.com/documents and the Company and the Investor agree that neither one has modified the form, except to fill in blanks and bracketed terms.
The “Post-Money Valuation Cap” is [Post-Money Valuation Cap]. See Section 2 for certain additional defined terms.
Events
(a) Equity Financing. If there is an Equity Financing before the termination of this Safe, on the initial closing of such Equity Financing, this Safe will automatically convert into the greater of: (1) the number of Standard Preferred Shares equal to the Purchase Amount divided by the lowest price per share of the Standard Preferred Shares; or (2) the number of Safe Preferred Shares equal to the Purchase Amount divided by the Safe Price.
In connection with the automatic conversion of this Safe into Standard Preferred Shares or Safe Preferred Shares, the Investor will execute and deliver to the Company all of the transaction documents related to the Equity Financing; provided, that such documents (i) are the same documents to be entered into with the purchasers of Standard Preferred Shares, with appropriate variations for the Safe Preferred Shares if applicable; and (ii) have customary exceptions to any drag-along applicable to the Investor, including (without limitation) limited representations, warranties, liability and indemnification obligations for the Investor.
This is a preview. The full template is free on GitLaw.
About this template
What is this template?
This is a post-money valuation cap version of the Simple Agreement for Future Equity specifically modified for Canadian use. It contains a standard 4-month and one day hold period notice required by Canadian securities legislation and a tax characterization clause for U.S. federal income tax purposes.
When should you use it?
Use this when a Canadian startup is raising seed funding and both parties prefer a post-money cap over a pre-money valuation. Use the SAFE: Valuation Cap and Discount (Canada) version instead if a price discount is also required.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 1(a) | Equity Financing | The Safe automatically converts into Preferred Shares upon an Equity Financing based on either the lowest share price or the Safe Price. |
| 1(b) | Liquidity Event | Investors receive the greater of the Purchase Amount or the Conversion Amount immediately prior to a Change of Control or IPO. |
| 1(d) | Liquidation Priority | This instrument ranks junior to indebtedness, on par with other Safes and Preferred Shares, and senior to Common Shares. |
| 3 | Company Representations | The Company confirms its status as a private issuer under Section 73.4 of the Securities Act (Ontario) and National Instrument 45-106. |
| 4 | Investor Representations | The Investor confirms they are an accredited investor under Rule 501 of Regulation D or applicable Canadian securities laws. |
| 5(c) | Dividend Amount | The Company must pay the Investor a Dividend Amount if a dividend is paid on Common Shares while the Safe is outstanding. |
Who it's for
- a Canadian private issuer raising early-stage capital via a post-money valuation cap
- an investor providing capital to a startup without requiring immediate share issuance
- a corporation organized under Canadian law seeking a standardized Y Combinator investment form
How long it runs and how it's signed
How long
Runs until the work is done
Survives the end
Termination
Signed by
Company, Investor
Witness
Not required
Notarisation
Not required
Law it's drafted under
Refers to
Securities Act of 1933
Governed by
Securities Act (Ontario)
Refers to
National Instrument 45-106
Refers to
Internal Revenue Code of 1986
Canada note
This version is drafted for Canada. Provinces differ on employment standards and Quebec applies civil law rather than common law. Tell GitLaw which province applies and it adjusts the draft.
Jurisdiction
Canada
United States of America
Document info
HTML document. Document created on Fri Sep 26th, 2025. Last updated on Mon Oct 6th, 2025.
This document is public
Licensed under CC BY 4.0 (Attribution).
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