The SAFE emerged as a modern alternative to convertible notes, designed to streamline early stage funding by removing debt obligations, interest, and maturity dates. It allows founders to raise capital quickly without locking in a valuation before meaningful traction exists, while investors secure a future equity position through conversion terms like valuation caps or discounts. SAFEs defer valuation to a later priced round or liquidity event, enabling fast fundraising and reducing legal complexity. However, SAFEs influence dilution subtly: multiple SAFEs can stack, and founders often underestimate how much ownership will eventually be given up. They also shift risk between founders and investors—founders accept uncertainty about future ownership, while investors accept uncertainty about timing. While SAFEs simplify early funding and prioritize speed and trust, careful tracking and planning are critical to avoid unexpected dilution or complications in later rounds.
