Unlike the original premoney SAFE Simple Agreement for Future Equity the 2018 postmoney SAFE uses a postmoney valuation cap. The SAFE is a very popular startup funding vehicle. Both versions can (but don't always) result in the SAFE investor receiving SAFE Preferred shares upon the equity conversion. These are very similar to standard preferred shares, but with differences in liquidation preference (we show a simple liquidation preference example using a 1x participating liquidation preference), conversion price, and dividend terms.

The SAFE agreement valuation cap is the biggest differences in the two versions. The video walks through a Simple Agreement for Future Equity example cap table to show exactly how postmoney SAFE funds convert to a committed percentage of ownership, and how that results in founder equity dilution.

Differences in prorata participation rights are also discussed.

Compared to the convertible note, the SAFE has no interest rate and no maturing date, so it is simpler and more entrepreneur friendly than the convertible note.

This StartupSOS channel provides practical, howto advice for new entrepreneurs who plan to build a growth startup with investor funding.