Education / Crowd SAFE
Crowd SAFE guide
A SAFE (Simple Agreement for Future Equity) lets an investor fund a company now and convert into equity later at terms defined by a valuation cap and/or discount. Conversion typically happens at a priced round or acquisition. A SAFE is not a loan. There is no interest and no repayment date.
Fools uses a Crowd SAFE, a SAFE adapted for crowdfunding's many small investors. Backers are pooled and kept off the company's working cap table until a real conversion event, with no voting rights and no ongoing rights beyond Reg CF's required annual report. That keeps the founder's cap table clean and means near-zero ongoing accounting. It is equity only.
Crowd SAFE templates and terms shown here are educational only. Real legal documents and qualified securities counsel are required before any actual investment.
Core terms
- Valuation cap
- The maximum company valuation used for conversion. Lower cap = more ownership for the investor. Guidance for many early raises: $5M–$10M - not a rule.
- Discount
- Optional percentage off the priced-round price. Investor gets the better of cap or discount.
- Post-money vs pre-money
- Post-money SAFEs calculate ownership after including the SAFE money, making dilution more transparent for founders and investors.
- Conversion & dilution
- At a qualifying equity financing, SAFEs convert into preferred stock. Founders dilute; earlier SAFE holders share the cap table according to their effective valuation.
Simple conversion calculator
Illustrative ownership at conversion: 0.063% at effective valuation $8M. Ignores option pools, MFN, and side letters - education only.
Crowd SAFE vs note vs priced equity
| Crowd SAFE | Convertible note | Priced equity | |
|---|---|---|---|
| Debt? | No | Yes (maturity, interest) | No |
| Complexity | Low–medium | Medium | High |
| Valuation now? | Deferred (cap/discount) | Deferred | Set now |
| Best for | Speed, clarity of ownership | Debt-comfortable parties | Larger rounds, boards |
| Counsel cost | Lower typically | Medium | Higher |
Fools does not provide investment advice, recommend offerings, or act as a broker. Consult your own securities counsel. Real offerings run through a registered funding portal or broker-dealer under Regulation Crowdfunding.