SAFE Agreement
A SAFE (Simple Agreement for Future Equity) is an investment contract that gives investors the right to receive equity in a future funding round. It's commonly used for early-stage startup funding.
- 01Investor Details
- 02Company Details
- 03Investment Terms
- 04Financial Metrics (Balanced/Discount)
- 05Investor Rights & Reps
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About this document
What it is for, what UAE law expects and when to ask a lawyer instead.
What is a SAFE Agreement?
A SAFE (Simple Agreement for Future Equity) is an investment instrument originally created by Y Combinator. It allows investors to give cash now in exchange for equity later, usually when a priced funding round occurs.
It is faster and cheaper than a traditional equity round because it delays the difficult task of valuing the company until it is more mature.
Is it Valid in the UAE?
Yes. Major financial free zones like ADGM (Abu Dhabi Global Market) and DIFC (Dubai International Financial Centre) specifically recognize SAFE instruments, making them the standard for early-stage startup funding in the region.
Mainland recognition is evolving, but the contractual obligation to issue shares is generally enforceable.
What Crucial Information Does It Cover?
Our template follows international standards:
1. Valuation Cap
Sets a maximum company valuation at which the SAFE converts to equity, protecting the investor from dilution.
2. Discount Rate
Gives the SAFE investor a discount (e.g., 20%) on the share price compared to new investors in the next round.
3. Trigger Events
Defines what events trigger conversion (e.g., Equity Financing, Liquidity Event, or Dissolution).
4. Pro-Rata Rights
Optional right for the investor to participate in future rounds to maintain their ownership percentage.
Risks of Non-Compliance
Cap Table Mess
Stacking too many SAFEs with different caps can lead to confusing and diluted ownership structures.
Zombie SAFEs
If a priced round never happens, the SAFE remains outstanding indefinitely, creating uncertainty.
Conversion Shock
Founders may be surprised by how much equity they lose if the valuation cap is too low.
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