SAFEs and side letters in the Library
The Y Combinator SAFEs and pro rata side letters in the Library, which one to use, who signs them and what they ask.
The Library holds Y Combinator's post-money SAFEs and pro rata side letters, copied word for word from the forms Y Combinator publishes, with the other standard agreements described in The Library of standard agreements. Their wording is unchanged and is published under a Creative Commons Attribution-NoDerivatives licence; your answers fill in their blanks. Magpie does not give legal advice: have a lawyer review an agreement before anyone signs it.
A SAFE (Simple Agreement for Future Equity) is an agreement between a company and an investor. The investor pays the purchase amount now, and the SAFE converts into shares when the company next raises a priced round. It is not a loan: it has no interest and no maturity date.
To see what a finished agreement looks like, open it in the Library and select Download a sample PDF in More.
Which one to use
| Standard agreement | For |
|---|---|
| SAFE: valuation cap, no discount | A US corporation. The SAFE converts at a price set by the valuation cap. |
| SAFE: discount, no valuation cap | A US corporation. The SAFE converts at the priced round's price less the discount. |
| SAFE: uncapped MFN | A US corporation. No cap or discount; the investor can take the better terms of a SAFE or other convertible security issued later. |
| Pro rata side letter | Alongside a valuation cap SAFE: the investor's right to buy their share of the next priced round. |
| SAFE and side letter (Canada) | A corporation incorporated under the laws of Canada or of a province or territory. |
| SAFE and side letter (Cayman Islands) | A Cayman Islands exempted company. |
| SAFE and side letter (Singapore) | A private limited company incorporated in Singapore. |
The Canada, Cayman Islands and Singapore forms state amounts in US dollars. Y Combinator asks that you get advice from a lawyer licensed in that country before relying on them.
Who signs
| Party | Who signs |
|---|---|
| The company | The officer you name in Signed for the company by, with their title. |
| The investor | The investor, or for a firm, the person you name in Signed for the investor by. |
Each signer receives their own link from E-Signatures, at the email address you enter for their party. A side letter does not print the email addresses; a SAFE prints them, with the addresses, on its signature page.
The questions
| Question | What to enter |
|---|---|
| Company name | The company's exact legal name, as registered. |
| State of incorporation, Incorporated under the laws of | Where the company is incorporated. Only the US and Canada forms ask. |
| Company registration number | The Singapore company's registration number (UEN). |
| Purchase amount | What the investor pays now, in US dollars. |
| Post-money valuation cap | The company value used to set the price per share when the SAFE converts. |
| Discount | The discount on the price per share, such as 20 for 20%. The SAFE prints its Discount Rate as 100 minus the discount, as its blank asks. |
| Date of the SAFE | The date the investor pays. A side letter is dated on or about the same day. |
| Governing law, Courts | The state or province whose laws govern the SAFE. The Cayman Islands and Singapore forms name their own. |
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