Y Combinator SAFE Documents
The SAFE (Simple Agreement for Future Equity) is the instrument most US seed rounds are closed on. Y Combinator publishes the forms openly; the three post-money variants, the pro rata side letter and the user guide are linked below in their official versions. This page adds what the forms do not say: how each one converts, where the dilution actually lands, what founders negotiate, and why a Turkish company signing a SAFE needs a different build underneath it. Jump to the documents.
These documents are designed for the Delaware C-Corp structure. Direct use by a Turkish Limited Şirket or Anonim Şirket is legally problematic and creates incompatibility with the Turkish Commercial Code. To replicate similar structures inside a Turkish entity, jurisdiction-specific adaptations are required: consult Turkish counsel.
All rights belong to Y Combinator. Vircon Legal links these documents only for reference; no copyright is claimed and no modifications are made. Original source: ycombinator.com/documents
How a post-money SAFE works. The investor pays now and receives no shares. At the next priced round (the “Equity Financing”) the SAFE converts into preferred shares at a price set by its one mechanism: a valuation cap, a discount to the round price, or neither, with only an MFN right. If the company is sold first, the investor takes the greater of their money back or the value of the shares they would have received; in a dissolution they are paid before common.
“Post-money” is the part founders under-read. Under the 2018 forms the investor’s ownership is fixed at purchase amount divided by the post-money cap, and every SAFE stacked before the round dilutes the founders, not the earlier SAFE holders. Three SAFEs at a $8M cap totalling $1.6M are not “a bit of dilution”; they are 20% of the company before the Series A prices anything. The arithmetic is in dilution math.
The documents (official Y Combinator versions)
SAFE: Valuation Cap Only
The most common variant. The investor secures a hard ceiling (cap) on the conversion valuation. No discount applied.
SAFE: Discount Only
The investor receives a fixed discount (typically 10-25%) off the price of the next priced round. No cap.
SAFE: MFN Only (No Cap, No Discount)
The most founder-friendly variant. The investor only gets Most Favored Nation rights: the option to inherit better terms from subsequent SAFEs.
Pro Rata Side Letter
Optional side letter to a SAFE. Grants the investor pro rata participation rights in the next priced round.
SAFE User Guide
YC’s official user guide for the SAFE variants. Conversion mechanics, sample calculations, pro rata explanation, and best practices: by Carolynn Levy, February 2023.
What each form does, and what founders negotiate
SAFE: Valuation Cap Only
The standard form. Conversion price is the post-money cap divided by the company’s fully diluted capitalisation at the round (including the option pool and all converting SAFEs). If the round prices the company below the cap, the SAFE converts at the round price instead: the cap is a ceiling, not a fixed price.
What founders negotiate. The cap, and only the cap; everything else in the form is fixed by design. The number to model is not the cap itself but the percentage it hands over: purchase amount ÷ cap, summed across every SAFE outstanding. Founders also decide whether a side letter comes with it.
In a Turkish company. The cap logic can be reproduced, but not the automatic conversion. Turkish law has no instrument that turns into shares by itself: shares are created by a capital increase, resolved by the general assembly with existing shareholders waiving their pre-emptive rights (Turkish Commercial Code Art. 461), and cannot be issued below nominal value (Art. 347). The Turkish build is an investment agreement with undertakings to carry out that increase at the agreed formula.
Glossary: Valuation cap · Post-money SAFE · Post-money valuation · Automatic conversion | Read: How SAFEs work under Turkish law
SAFE: Discount Only
The SAFE converts at the next round’s price less a fixed percentage (typically 10 to 25 percent) with no ceiling. It rewards the investor for coming early without fixing a valuation, which suits companies whose value is expected to move a lot before the round.
What founders negotiate. The discount rate, and whether the form should really be discount-only or cap-only: a discount alone gives the investor no protection if the round prices high, which is why most investors prefer a cap and most founders should offer the discount form first.
In a Turkish company. Same conversion problem as the cap form, plus one more: a discount can push the conversion price toward nominal in a low-priced round, and Article 347’s floor means the formula must include a nominal-value backstop that the US form does not need.
Glossary: SAFE discount · Conversion discount · Qualified financing | Read: SAFE or convertible note: a decision framework
SAFE: MFN Only (No Cap, No Discount)
No cap, no discount: the SAFE converts at the round price like any new investor. Its only protection is most-favoured-nation treatment: if the company later issues a SAFE on better terms (a cap, a discount), this holder may elect to take those terms instead. It is the form for very early money from people who back the founder rather than price the company.
What founders negotiate. Little in the document; a lot in sequencing. Every later SAFE with a cap gives all MFN holders the right to that cap, so the first capped SAFE effectively re-prices everything before it. Founders using MFN SAFEs should set the first cap knowing what it drags in.
In a Turkish company. An MFN clause is an ordinary contractual promise and works under Turkish law as written. The conversion it leads to still needs the capital-increase build described above.
Glossary: MFN clause · Convertible note · KISS | Read: Bridge financing with convertible notes and KISS in Türkiye
Pro Rata Side Letter
An optional letter giving the SAFE holder the right to buy its pro rata share of the preferred sold in the Equity Financing in which the SAFE converts, the next priced round, not every round after it. Pro rata is measured on the holder’s post-conversion ownership. YC moved this right out of the SAFE and into a side letter so that founders give it deliberately, not by default.
What founders negotiate. Whether to give it at all, and to whom. A side letter to a lead angel or a fund that will follow on is normal; one to every small cheque creates an allocation problem at the Series A, when the lead investor wants the round and the side letters have already claimed part of it.
In a Turkish company. Pre-emption is the default for every existing shareholder (Art. 461), but a SAFE holder is not a shareholder until conversion, so the participation right must be written into the investment agreement as an undertaking by the company and the founders.
Glossary: Pro rata · Super pro rata · Side letter | Read: Investor rights: veto, information and the board
SAFE User Guide
YC’s own explanation of the forms: the conversion mechanics, worked examples for each variant, how the cap interacts with the option pool, and how to read the capitalisation definitions. It is the document to read before the forms, and the one to hand an investor who asks why the SAFE says what it says.
Use it for. The worked examples. Founders who run their own numbers through the guide’s method before signing avoid the most common SAFE mistake, which is discovering the combined dilution at the Series A term sheet.
In a Turkish company. The examples still hold as economics. What changes is the plumbing, and for that the pages below are the Turkish user guide.
Glossary: Cap table · Option pool · Liquidity event | Read: SAFE financing in Türkiye: the guide · Is a SAFE legal in Türkiye?
Where to go next
The forms above describe a Delaware seed round. These pages describe the Turkish one, and the glossary translates between them.
Frequently asked
What is the difference between a post-money and a pre-money SAFE?
Under the post-money forms YC has published since 2018, the investor’s percentage is fixed at purchase amount divided by the post-money cap, and additional SAFEs dilute the founders rather than earlier SAFE holders. Under the original pre-money forms, SAFE holders diluted each other and their final percentage was unknown until the round. The post-money version is clearer for investors and harsher for founders who stack many SAFEs.
What happens to a SAFE at the Series A?
It converts into shares of preferred stock at the lower of the cap price and the round price (or at the discounted price, for a discount SAFE). The converted shares are usually a “shadow” series of preferred with the same rights as the new investors’ shares but a different price. The SAFE then ceases to exist.
What does the MFN in a SAFE actually do?
If the company later issues SAFEs on terms more favourable to the investor (a valuation cap, a discount), an MFN holder may elect to amend its SAFE to match. It does not give any pricing protection of its own, which is why the MFN-only form is the most founder-friendly of the three.
Does the pro rata side letter give participation rights in every future round?
No. YC’s form gives the right to participate in the Equity Financing in which the SAFE converts. Ongoing pro rata rights in later rounds are negotiated at that round, typically in the investor rights agreement.
Can a Turkish anonim şirket sign a YC SAFE?
It can sign it as a contract, and Turkish law will enforce the promises in it. What it cannot do is convert automatically: Turkish shares come into existence only through a registered capital increase, so the SAFE’s economics have to be rebuilt as undertakings to carry out that increase at the agreed formula, with the pre-emptive rights of existing shareholders waived and the nominal-value floor respected. The pages linked above set out that build.
Sources. Y Combinator: Standard Documents (SAFE).