This past Monday I talked about convertible notes and the benefits of using them as a funding vehicle in the early stages of your startup. Today I am going to cover the simple agreement for future equity, or SAFE.   As a reminder, a convertible note is a hybrid funding vehicle that combines aspects of debt and equity funding. They are essentially a short-term debt obligation where the investor can convert their investment into shares of the company at a later date. One main benefit of a convertible note is that the valuation of the company is postponed until there is more information available through which to set a fair value.   A truly simple agreement for future equity   The concept of a simple agreement for future equity, or SAFE, was created by one of the most recognized startup incubators in the U.S., or perhaps even in the world. The Y Combinator incubator came up with the SAFE vehicle to take advantage of some of the aspects of a convertible note, but with even simpler terms.   With a convertible note the startup owes debt to the investor. Whereas with a simple agreement for future equity the investor only has a warrant (or right) to purchase equity in the startup at a later date. So, no interest is left to pile up to be paid by the startup.   Also, I didn’t mention this on Monday, a SAFE does not have a maturity date since it isn’t a debt vehicle. A convertible note does eventually come due.   When does a SAFE make since?   Like a convertible note, the simple agreement for future equity makes a lot of since early in the startup’s life when valuations can be tough to assign.    In my mind, the SAFE vehicle is a preferred choice to a convertible note because it does not tie up the startup with debt and interest that accrues.   Next up   This Friday I will talk about yet another type of simplified funding vehicle called a KISS.