The simplest way to take early investment without agreeing on a valuation.
SAFE stands for Simple Agreement for Future Equity. It was created by Y Combinator in 2013 as a faster, cheaper way to raise early-stage funding. Instead of negotiating a full share price and issuing equity immediately, the investor gives you money now and receives shares later — usually when you do a priced funding round.
Think of it as a promise: "You invest today, and when we next raise a proper round and set a valuation, your investment converts into shares at favourable terms."
A SAFE typically includes one or both of these mechanisms:
A valuation cap sets the maximum company valuation at which the SAFE converts. If the cap is £2 million and your next round values the company at £5 million, the SAFE investor's money converts as though the company was worth £2 million. They get more shares for their early bet.
A discount gives the SAFE investor a percentage off the share price in the next round, typically 10% to 25%. So if new investors pay £1 per share, a SAFE investor with a 20% discount pays 80p.
Some SAFEs have both a cap and a discount. In that case, the investor gets whichever is more favourable to them.
A convertible note is a loan. It has an interest rate, a maturity date, and if things go wrong, the investor can technically demand repayment. A SAFE is not a loan. There's no interest, no maturity date, no repayment obligation. It only converts when a qualifying event happens — usually the next funding round.
For founders, SAFEs are simpler and more founder-friendly. For investors, they carry slightly more risk because there's no debt backstop. In practice, both are common at pre-seed and seed stage. SAFEs have become the default in many ecosystems, particularly in the US and increasingly in the UK.
SAFEs were designed for US companies, and there are a few wrinkles when using them in the UK.
The biggest one is SEIS and EIS. These tax relief schemes — which are a major reason UK angels invest at all — require that investors receive actual shares. A standard SAFE delays share issuance until conversion, which means your investors may not be able to claim their tax relief immediately. Some UK lawyers have adapted the SAFE structure into an Advance Subscription Agreement (ASA) that works better with SEIS/EIS rules. If your investors want tax relief, talk to a lawyer about this before you use a standard SAFE template.
The other consideration is that UK contract law works differently from US law. A US SAFE template may not be enforceable or optimal under English law. Use a UK-adapted version. SeedLegals and other UK platforms offer these.
SAFEs work best when you're raising a small amount (typically under £500k), you and your investors agree that it's too early to set a proper valuation, and you want to close quickly without expensive legal fees. They're less appropriate for larger rounds where investors expect governance rights and a priced valuation.
A founder who understands why they're using a SAFE (not just because someone told them to), has checked that it's compatible with their investors' SEIS/EIS expectations, and has used a UK-adapted agreement reviewed by a lawyer. The conversion terms are clear to both sides and written in plain English.
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Try the funding finder →This is general information, not financial or legal advice. Always do your own research and seek independent professional advice.