Y Combinator publishes the SAFE - the Simple Agreement for Future Equity - as open standard forms, and says the instrument it created in 2013 is "the most common way early-stage startups raise their early investments." A SAFE is a short contract: the investor signs and wires money now, and in return gets the right to shares later. Per YC's FAQ, the SAFE converts into preferred stock automatically if the startup sells preferred shares in an equity financing - there is no minimum amount the round must raise to trigger conversion, the holder has no opt-out, and the SAFE then terminates. The post-money version has been the YC standard since 2018.
The cap is the price conversation
On the standard post-money form, the valuation cap is the highest valuation at which the SAFE converts: if the priced round values the company above the cap, the SAFE converts at the cap - and ownership sold equals the investment amount divided by the cap. YC's summary of this form is that usually the only term to negotiate is that cap, and its advice is to negotiate backwards: pick the raise amount and the ownership you will sell, and the cap follows. Its worked example: a $1M raise at 15% sold gives a post-money cap of about $6.7M; raise $500k on that cap and you sell roughly 7.5%.
One caveat on that math: the ~15% is the ownership sold in the SAFE round itself - investment divided by the post-money cap - before any dilution from the later priced round's new money, which shrinks every existing holder, SAFE holders included.
Discount and MFN are the two other forms
The "only negotiate the cap" simplification belongs to the cap form; YC publishes three US versions of the post-money SAFE, and the other two carry different defining terms. The discount form has no cap: the investor converts at a reduced price relative to the priced round - on a 20% discount SAFE, at 20% below the round's price per share; YC's FAQ puts common discounts at 10-20%.
The MFN form has neither cap nor discount, and its mechanism is an election, not an automatic rewrite. Per YC's SAFE User Guide: if the company later issues safes or other convertible securities with more advantageous terms, the MFN holder may choose to amend its safe to match. The amended safe becomes identical to the later one except for the purchase amount - no cherry-picking individual terms - and the provision typically gives one amendment opportunity, not a rolling series; once triggered, the MFN is amended away. Side letters and ancillary agreements do not trigger it. If a priced equity round happens before the holder amends, the unamended MFN safe converts into the same preferred stock as the new-money investors, at the same price; if a liquidity event comes first, the holder receives a portion of proceeds equal to the purchase amount. YC's dating note: the MFN looks at later safes from the later of signing or the wire arriving - so close lower-cap SAFEs, fully wired, before issuing an uncapped MFN.
Alongside the forms sits an optional pro rata side letter: the right, not the obligation, for an investor to put money into your future priced round to maintain their percentage. That promise affects your future cap table, so treat it as a negotiated term, not boilerplate.
What a SAFE is not
A SAFE is not stock yet, and it is not debt: no interest rate, no maturity date forcing repayment. It becomes preferred shares only on conversion in an equity financing. YC also posts cap-and-discount variants for companies formed in Canada, the Cayman Islands and Singapore, with a plain instruction to consult a lawyer licensed in the relevant country first. That advice applies everywhere: the forms are a starting point, and a few hundred dollars of counsel beats discovering a side letter you forgot you signed.
Why it became the default
YC's own pitch: standard, simple, clear about the ownership sold, and proven over a decade of use. A convertible note is debt, with interest and a maturity date; a priced round buys certainty through a longer, more expensive negotiation. And because SAFE checks close independently, dilution accrues quietly - track the running post-money total after every signature.