Understanding SAFE Agreements
One of the biggest barriers to early-stage investment in our region is the traditional approach to equity financing. Many investors prefer to take direct equity stakes, even when startups are in their earliest and most formative stages. But what if there were a simpler, founder-friendly way to invest that benefits both entrepreneurs and investors?
A SAFE (Simple Agreement for Future Equity) is a modern investment structure designed to make early-stage funding more efficient, flexible, and founder-friendly. Originally developed by Y Combinator, SAFE agreements have become a widely accepted alternative to traditional equity financing.
How a SAFE Works
A SAFE is not a loan, and not an immediate ownership stake. Instead, it is an agreement that gives an investor the right to receive equity in the future when a company raises a qualified funding round. The investment converts into equity when certain conditions are met—typically during a future priced equity round (like a Series A).
By using SAFE agreements, investors and founders can move forward without needing to negotiate valuation upfront, allowing startups to grow before setting a firm market price.
SAFE agreements benefit everyone
Investor Benefits
Access to Early-Stage Deals:
Invest in promising startups without immediate valuation concerns, allowing founders to prove their market before pricing equity.
Streamlined Process:
SAFE agreements are simpler, faster, and lower-cost than traditional equity financing, reducing legal complexities.
Upside Potential:
Investors still benefit from future equity growth, often with valuation caps that ensure fair conversion terms.
Downside Protection:
If a company never raises another round, investors retain their priority claim, offering some protection without saddling startups with debt.
Founder Benefits
Delay Valuation Until Growth:
Avoid pricing your company too early, letting you build traction before setting a valuation.
Simple, Founder-Friendly Terms:
Unlike traditional equity deals, SAFEs are fast, flexible, and don’t require lengthy negotiations or board seats.
No Monthly Payments or Debt:
Unlike loans or convertible notes, no interest or repayment schedule means you can focus on growing the business.
More Control, More Flexibility:
Since equity isn’t granted until a future funding round, founders maintain more control during their critical early growth phase.
Why SAFE Agreements Matter for No Boundaries
At No Boundaries, we believe one of the fastest ways to unlock more investment in our region is by embracing flexible funding structures like SAFE agreements. By using SAFE investments, we can make it easier for local investors to back early-stage companies, helping more startups scale without unnecessary financial burdens.