SAFE Notes and Accelerator Deal Terms Explained

Almost every accelerator invests the same way: on a SAFE, sometimes combined with a small fixed-equity piece. The headline numbers — "$500K for 7%", "$220K", "up to $1M" — hide very different deals. This guide explains SAFEs, valuation caps, MFN clauses and pro rata rights in plain English, then compares how the best-known accelerators use them.

This is general information, not legal or financial advice. Have a startup lawyer review any document before you sign.

What is a SAFE?

A SAFE (Simple Agreement for Future Equity) is a contract created by Y Combinator in 2013. The investor gives you money now; in return, they get the right to receive shares later, when you raise a priced equity round. Until then, there's no valuation negotiation, no board seat and no shares changing hands.

SAFEs are popular because they're fast and cheap: the standard documents are free, a few pages long, and widely understood by investors.

The terms that decide what a SAFE costs you

Valuation cap

The cap is the maximum valuation at which the SAFE converts. If you raise $250K on a $10M post-money cap, the investor owns roughly 2.5% after conversion — even if your priced round values the company at $30M. The lower the cap, the more of your company the investor gets.

Post-money vs pre-money

Since 2018, YC's standard SAFE is post-money: the cap includes all the SAFE money raised. That makes dilution easy to calculate — $X invested ÷ post-money cap = ownership — but it also means each additional SAFE dilutes you, not the earlier SAFE holders.

Discount

Some SAFEs give a discount (often 10–25%) on the price paid by investors in the priced round, instead of or in addition to a cap.

MFN (most favored nation)

An MFN SAFE has no cap of its own. Instead, it automatically takes the best terms you give any later SAFE investor before your priced round. If you later raise on a $15M cap, the MFN SAFE converts at $15M too. Accelerators use uncapped MFN SAFEs for the larger part of their cheque, so that piece is priced by the market rather than by the accelerator.

Pro rata rights

A pro rata right lets the investor buy enough of your next round to keep their percentage. It's common in accelerator deals and usually harmless — but it does reserve part of future rounds.

How the big accelerators structure their deals

Terms change and some regional programs differ, so check each program's official page. You can compare cheque sizes and equity across all programs in our program directory.

Worked example: YC's deal

Say you join YC and later raise a seed round on SAFEs at a $20M post-money cap.

• The $125K for 7% piece gives YC 7%, fixed.
• The $375K MFN SAFE converts at your $20M cap: $375K ÷ $20M ≈ 1.9%.

So YC ends up with roughly 8.9% for $500K, before dilution from your later rounds. At a higher cap, the second piece costs you less; at a lower cap, more.

Worked example: speedrun's deal

speedrun's $500K for 10% upfront is a fixed price — arithmetically, $500K for 10% implies about a $5M post-money valuation for that first tranche. The follow-on up to $500K goes into your next round on that round's terms. The upfront equity cost is higher than YC's 7%, in exchange for more committed capital.

How to compare two offers

Compare offers on four things, not just the headline amount:

1. Fixed ownership. How much of the company is fixed regardless of your next round?
2. Conversion of the rest. Is the remaining money capped, uncapped MFN, or committed to a future round?
3. Effective price. Total money ÷ total expected ownership at a realistic next-round valuation.
4. What you get besides money. Network, investor demand at demo day, customers, credits, the brand on your fundraising deck.

For many founders the fourth point dominates. A strong accelerator brand can raise your seed valuation by more than the equity it costs.

Worked example: stacking SAFEs

Founders often underestimate how quickly SAFEs add up. Suppose you raise three SAFEs before your priced seed round:

That's 14.5% sold before your seed round, which might sell another 15–20%. Model every SAFE in a cap table as you raise, not when the priced round arrives.

Glossary

• Cap table — the record of who owns what percentage of the company.
• Conversion — when a SAFE turns into shares, usually at your first priced round.
• Dilution — your ownership falling as new shares are issued to investors or employees.
• Liquidity event — an acquisition or IPO; SAFEs also convert or pay out here.
• Option pool — shares reserved for future employees; often expanded before a priced round, diluting existing holders.
• Priced round — a round where investors buy shares at a set price per share, usually led by a single investor.
• Side letter — a separate agreement giving an investor extra rights, such as pro rata or information rights.

Common SAFE mistakes

• Losing track of dilution. Raising many post-money SAFEs at different caps adds up quickly. Keep a cap table model updated after every SAFE.
• Stacking too many MFNs. MFN holders all benefit from your best later terms; make sure you understand who converts at what.
• Ignoring side letters. Pro rata and information rights often live in a side letter. Read it.
• Not having a lawyer review. Standard documents are standard until someone edits them.

Where to go next

If you're weighing an accelerator against raising directly from angels, read accelerator vs incubator vs angel investors. If you're preparing your first round, our pre-seed fundraising playbook covers round size, valuation and process.