SAFE Financing Documents

In tech startup investing, the Simple Agreement for Future Equity (SAFE) has become popular for pre-seed and seed investments, particularly in accelerators – the purpose for which it was invented.

Y Combinator, the first seed accelerator in the USA, introduced the SAFE in 2013 significantly reducing the cost, time and legal friction for that first formal investment. A SAFE  streamlines the investment of small amounts of money in the very early stages of a venture – just what seed startups need – without the extensive legal work or costs required for investing in a regular priced equity round.

There were several shortfalls to the original pre-money SAFE making it less than ideal for startups trying to raise pre-seed and seed capital. In 2018 Y Combinator created a new, post-money valuation cap version of the SAFE. This version retains the simple nature of the SAFE while addressing the shortfalls but, beware, it does operate quite differently!

In particular, the post-money valuation cap SAFE increases the ability for startups to raise additional funding using additional SAFEs, as investors can be more certain about what they’re getting for their investment and less likely to pass on the opportunity inadvertently being too complex to assess. Equally, the founders can know with certainty the dilution they will experience from the SAFE ‘stack’, an outcome not so easily perceived with the pre-money version.

The post-money SAFE features a preamble that helps to ensure that there are no modifications made to the agreement – everyone can be sure that the agreement works in the way they expect if they’re familiar with the post-money SAFE. At Moonshot, we’ve seen several versions of supposed SAFE agreements, each that operate differently (some well-known accelerators and VC have even been distributing different versions annually), and this significantly increases the due diligence required to assess whether a SAFE is actually a SAFE, and to determine the actual investment terms.

Y Combinator have been kind enough to make available templates for USA, Canada, Caymans and Singapore but, without one for Australia we tasked our lawyers with creating a true post-money valuation cap SAFE that is compliant with Australian law and mimics the original USA version of the agreement entirely as defined by Y Combinator here.

We’re making this template available for all Australian startups to use and we hope that this template will lead to more capital shifting from investors to tech startups due to the reduction of friction.

Of course, Moonshot does not assume responsibility for the contents of, or the consequence of using, any version of the SAFE or any other document found on our website. Before using any of these forms, you should consult with a lawyer licensed in the country where your company was formed. Nonetheless, we hope you find the above useful and valuable.