SAFE: Valuation Cap, No Discount (US) by Y Combinator
THIS INSTRUMENT AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE 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.
SAFE (Simple Agreement for Future Equity)
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 [company state of incorporation] corporation (the “Company”), issues to the Investor the right to certain shares of the Company’s Capital Stock, subject to the terms described below.
This Safe is one of the forms available at 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 shares of Standard Preferred Stock equal to the Purchase Amount divided by the lowest price per share of the Standard Preferred Stock; or (2) the number of shares of Safe Preferred Stock equal to the Purchase Amount divided by the Safe Price.
In connection with the automatic conversion of this Safe into shares of Standard Preferred Stock or Safe Preferred Stock, 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 Stock, with appropriate variations for the Safe Preferred Stock 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.
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About this template
What is this template?
This is a post-money SAFE instrument specifically used for early-stage equity investment where the valuation cap is determined after the investment is made. It is not a debt instrument and does not carry an interest rate or a maturity date, unlike a convertible note. The document specifically excludes a discount rate, relying solely on the Post-Money Valuation Cap for conversion pricing.
When should you use it?
Use this document when raising seed capital from accredited investors who agree to a fixed valuation cap but do not require a percentage discount on future share prices. If the investor requires a discount in addition to or instead of a cap, use the SAFE with Discount or SAFE with Valuation Cap and Discount instead.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 1(a) | Equity Financing | Automatically converts the Purchase Amount into Preferred Stock at the lowest price per share or the Safe Price during an Equity Financing. |
| 1(b) | Liquidity Event | Entitles the Investor to the greater of the Cash-Out Amount or the Conversion Amount immediately prior to a Change of Control or IPO. |
| 1(d) | Liquidation Priority | Ranks the Investor's claim junior to creditors, on par with other SAFEs and Preferred Stock, and senior to Common Stock. |
| 3 | Company Representations | Obliges the Company to confirm its valid legal existence, good standing, and ownership of intellectual property rights necessary for business. |
| 4 | Investor Representations | Requires the Investor to certify their status as an accredited investor under Rule 501 of Regulation D. |
| 5(c) | Dividends | Entitles the Investor to receive a Dividend Amount whenever the Company pays non-stock dividends to Common Stock holders. |
| 5(f) | Governing Law | Subjects the agreement to the laws of the specified governing law state without regard to conflict of law provisions. |
Who it's for
- a startup raising capital through a post-money valuation cap structure without offering a discount
- an accredited investor providing seed funding to a US-based corporation in exchange for future equity rights
- founders using the standard Y Combinator form to minimize legal negotiation for early-stage funding rounds
How long it runs and how it's signed
Law it's drafted under
United States note
This version is drafted for US law generally. Contract, employment and consumer rules vary by state — for example on non-competes and at-will employment. Tell GitLaw which state applies and it adjusts the draft.
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