There is a new cost-effective funding mechanism for startups gaining traction in Ireland at present. It is the simple agreement for future equity (“SAFE”) instrument. The SAFE instrument is a pro-forma instrument which provides an investor with a future right to purchase equity in a company typically subject to just two negotiation points - a valuation cap and a discount price for the potential future investment, and provides a low-cost way for startups to raise early stage funding due to the limited negotiation required.

SAFEs were first developed in the United States and we are now seeing this funding mechanism start to come into the Irish market. Leman have advised on a number of SAFE instruments in recent months proving that they are becoming a real and viable option in Ireland. In this article, we look a bit closer at SAFE instruments and considerations that both startups and investors should give thought to when contemplating a SAFE instrument.

The History

Y Combinator is an American seed money startup accelerator which was launched in March 2005. In late 2013 Y Combinator released the SAFE investment instrument for startups. The SAFE instruments went on to become popular in both the United States and Canada due to their simplicity, low cost and speed. Despite their popularity in the United States and Canada, SAFE instruments were slower in taking hold in Ireland, but they are becoming increasingly common here.

What is a SAFE?

It is a financing contract typically used by startups to raise capital in their seed financing rounds. It is similar to a warrant but, importantly, there is no requirement to value the company at the time of investment. Essentially, a SAFE instrument is an investment contract between a startup and an investor that gives the investor the future right to receive equity on certain triggering events which typically are:

  • Future equity financing; and
  • The sale of the company.

SAFE for Startups 

The most obvious benefits of using a SAFE instrument for startups is their simplicity and ease of understanding. There are typically only two terms to negotiate with investors which are the valuation cap and the discount. This allows startups to avoid high legal costs in securing funding. A SAFE instrument is similar to a convertible loan note in that it provides rights to a given investor for future equity in a company, but it is seen as a more founder-friendly alternative. This is because SAFE instruments have all of the same conversion features but lack the debt hallmarks of convertible loan notes. In particular, SAFE instruments have no maturity date or accruing interest.

There are risks associated with SAFE instruments that startups should be aware of. For example, in circumstances where a startup does a SAFE investment round prior to a priced equity round and the startup’s value has increased substantially in the interim, the investors under the SAFE instrument will typically get a substantial discount on equity due to the valuation cap and the discount in the SAFE instrument.

SAFE for Investors

What makes a SAFE instrument attractive to prospective investors is that the price of the equity that the investor will receive on conversion under the SAFE instrument will typically be lower than the price of any securities issued in connection with any future equity financing rounds. This is due to the above-mentioned valuation cap and discount rate.

There are also risks for investors associated with SAFE investments. One such risk is the possibility that there is no future equity financing and the company never gets sold. In these circumstances the investors will typically not be able to trigger a conversion into equity.

Side Letters

It is common for side letters to be included alongside the SAFE instrument with additional clauses. These side letters can modify the terms of the SAFE instrument in a variety of ways such as governing pre—emption rights on the issuance of further SAFE instruments and shares, board rights, information rights, rights to transfer shares and amending the constitution of the company. It is always worth considering from both an investor and startup perspective if the particular circumstances of a SAFE investment require a side letter.


The SAFE is a relatively recent and exciting addition to the seed financing toolkit for startups in Ireland and its impact remains to be seen. Leman Solicitors regularly advises startups and investors on all aspects of seed financing including SAFE investments and has extensive experience advising across a range of issues for both startups and investors. 

For further information please contact Mark Roberts at