Understanding the YC SAFE: A Guide to Simple Agreements for Future Equity
YC SAFE (aka the Y Combinator Simple Agreement for Future Equity note) is a financial instrument used by investors and startups to raise money. The instrument was created by YC and widely used in early stage venture investing. This financial tool serves as a convenient starting point for most businesses to manage shareholders and reward your team with equity.
Core Types of SAFE Notes
Startups can choose from several standard variations of the SAFE note depending on their deal terms. Specifically, the following SAFE notes are intended for use by companies:
- Safe: Valuation Cap, no Discount
- Safe: Discount, no Valuation Cap
- Safe: MFN, no Valuation Cap, no Discount
You can also include the optional Pro Rata Side Letter to tailor the agreement to your specific use case.
The SeedLegals English Law Version of YC SAFE
US investors are familiar with YC SAFE, but that’s Delaware law, US share class names and other US provisions that don’t work in the UK. Raising from US investors is a growing trend, and many founders now see US investors as the preferred choice for fundraising, particularly for Seed and Series A rounds. To bridge this gap, SeedLegals created a 1-click simple SeedFAST that’s an English-law version of a YC SAFE, perfectly designed for UK companies raising from US investors.
SeedFASTs are a fast and easy way to raise from individual investors before a funding round. Investments made by a SeedFAST convert into shares when the company does a funding round, at a valuation to be determined in the funding round. SeedFASTs are SEIS/EIS compatible too, as long as they are set to convert in no more than six months from date of signing.
Comparative SAFE Terms and Features
When selecting a SAFE note, it is important to understand the specific mechanisms of conversion. Below is a summary based on the available instrument types:
| Instrument Type | Key Feature | Additional Provisions |
|---|---|---|
| YC Post-Money SAFE | Valuation Cap | No Discount |
| Discount SAFE | Price Discount | No Valuation Cap |
| MFN SAFE | Most Favored Nation | No Valuation Cap, no Discount |
Raising from US Investors: Trends and Benefits
A combination of huge US fund sizes, increased willingness to make large investments and higher valuations common in the US means that founders switch focus to the other side of the Atlantic. At SeedLegals, the goal is to make it as easy as possible to raise investment. You can use an intuitive production-ready Webform to collect data from your users and generate filled PDF documents with user-submitted data. This streamlines deals with tailored proposals via traditional rounds or agile tools.
How to Create an English Law YC SAFE
- Log into SeedLegals.
- Select to create a SeedFAST, just as you normally would.
- Choose your preferred deal terms, just as you normally would.
- Select YC Post-Money SAFE, modified for English law.
It’s as easy as that – you can log in and create yours now. This process allows you to get SEIS/EIS tax relief certificates quickly and accurately with the help of experts while ensuring your legals are ready to get funded and grow your business.