Y Combinator’s “Simple Agreement for Future Equity” (SAFE), in its original form, was presented by YC as an alternative to convertible notes. It was effectively a convertible note without interest or a maturity date. While very popular within Silicon Valley, it remained a minority instrument almost everywhere else, including the East Coast, because most investors (not without justification) felt it was an imbalanced agreement that gave investors too few protections.

Entrepreneurs can get into trouble when attempting to replicate Silicon Valley norms and fundraising structures in tech ecosystems where the community approaches things differently. 

Recently, Y Combinator completely re-vamped the core economics of the SAFE, having it convert on a post-money instead of pre-money basis. This totally changed how the conversion of SAFEs into shares works, and made them far riskier of an instrument for startups; particularly because the new Post-Money SAFE has a very unique anti-dilution mechanism built in that can seriously penalize founders/the common stock if the startup does more seed rounds after the initial SAFE. Using a Post-Money SAFE can, in many contexts, mean far more dilution than if you’d used other acceptable alternatives. 

While SAFEs never became the dominant seed instrument outside of Silicon Valley (including in New England), we suspect that their more aggressive economics will make them even less utilized going forward. Seed equity and simple convertible notes with reasonable maturity dates and low interest are viable, and better, alternatives. In the latter case of simple convertible notes, they can be closed just as easily as a SAFE, with similar legal cost. 

For a deeper dive on this topic, see: Why Startups Shouldn’t use YC’s Post-Money Safe.