The founder's guide to SAFEs in Singapore

A SAFE is not a loan and it is not equity, not yet. It is a promise: the investor hands over money now, and receives shares later, when a priced round (or another trigger, like an acquisition) sets a value on the company.

Until that trigger fires, the cash sits on your balance sheet with no maturity date and no interest clock running against it. That is the entire appeal for a founder mid-raise: four pages instead of a forty-page Series A term sheet, no board seat changes hands, and no valuation argument has to happen before the money lands.

The cost of that speed is deferred, not removed. Every term you agree to now decides how much of the company that cash actually buys once the next round prices it. The three that matter are the valuation cap, the discount, and the pro rata line.

The cap sets a ceiling on the price the SAFE converts at, no matter how high the priced round comes in. If your seed SAFE carries a ten million dollar cap and the Series A prices the company at twenty million, the SAFE holder still converts as if the company were worth ten million. They effectively bought in at half price.

Most SAFEs carry both a cap and a discount (commonly 15 to 20 percent off the priced round). At conversion, the investor gets whichever term is more generous to them, never both stacked together. Read that sentence twice before you sign: it is the difference between a SAFE that behaves predictably and one that surprises you at the cap-table meeting.

• If the round prices below the cap: the discount applies, and the cap is irrelevant.
• If the round prices above the cap: the cap applies, and the discount is irrelevant.
• They never compound. A cap with a 20% discount does not give the investor a cap minus 20%.

The standard pro rata side letter gives a SAFE investor the right, not the obligation, to buy enough of your next priced round to maintain their ownership percentage. It costs you nothing today.

It becomes very real eighteen months from now, when a lead investor wants the whole allocation in a competitive round and you have promised slices of it away to four different SAFE holders.

• Record it in the same file as the cap table, not an inbox folder.
• Note two things for each: which round it follows, and for how long.
• Re-read the whole set before every new raise, so nothing surprises the lead.

Most SAFEs on both sides of a deal are the unmodified YC template, and for good reason: it is well understood and rarely worth re-negotiating from scratch. Two edits, however, earn the ten minutes of friction they cause.

The redline below is the whole edit. Strike the open-ended version, add a window and a scope:

“Investor shall automatically receive the benefit of any term more favourable to any other SAFE investor, for so long as any SAFE remains outstanding.”

“Investor shall receive the benefit of any more favourable cap or discount granted to a SAFE investor in the same round, for 12 months from the date of this instrument.”

In code terms, you are turning an unbounded loop into a fixed one. The field an editor should set on the next_rounds term is a small integer, not Infinity:

Two rounds is long enough to reward the investor who backed you first, and short enough that it never has to be renegotiated out of a term sheet later.

A SAFE is a good instrument used carelessly and a great one used deliberately. The four pages move fast precisely because they defer the hard conversation about value, and that deferral is only safe if you are tracking, in one place, what every SAFE and every side letter will cost you the day a priced round finally sets the number.

• You know which fires first, the cap or the discount, at your expected round size.
• Every pro rata side letter is written down next to the cap table.
• The MFN clause, if any, is scoped to one round and a fixed window.
• You have modelled the conversion table for more than two live SAFEs.

If you are running more than two or three SAFEs at once, model the conversion table before you take the next cheque, not after the term sheet arrives. When you want a second read, send us the document.