Glossary

SAFE

A SAFE is a type of Convertible Security that is a contract between a Company and an Investor used to raise capital during a financing round.

In exchange for a cash investment now, the contract gives the Investor a right to convert their SAFE into shares of Preferred Stock (typically in a separate Shadow Series) at a lower price per share than the new cash Investors in a subsequent Equity Financing.

To determine how much equity, the SAFE purchase amount is divided by a Conversion Price. The Conversion Price is determined based on the type of SAFE: (1) Valuation Cap, (2) Discount, (3) Valuation Cap + Discount, or (4) Most Favored Nation.

If the Company is sold or dissolves before an Equity Financing, then the SAFE converts into cash or equity.