SAFE (Simple Agreement for Future Equity)

A short-term debt instrument that converts into equity at a future financing round, typically at a discount to the next round's valuation. Convertible notes are commonly used in seed-stage financing because they defer the need to establish a valuation.

A legally binding contract that establishes confidentiality obligations between parties sharing proprietary information. NDAs are essential tools for protecting trade secrets and other sensitive intangible assets during due diligence, partnership discussions, and employee onboarding.

A legally binding contract between a company's shareholders that governs their rights, obligations, and the rules for key decisions including share transfers, board composition, dividend policy, and exit mechanisms. Essential governance infrastructure for investor-backed companies.

A short-term financing facility designed to provide temporary capital to a company or fund until permanent financing or the next funding round is secured. In the startup context, bridge loans often carry convertible terms that allow the lender to convert the outstanding balance into equity at a discount to the next round's price, compensating for the higher risk of interim financing.

Short-term funding used to bridge the gap between two financing rounds or before an anticipated liquidity event. Bridge loans or convertible notes are common structures, often provided by existing investors to sustain operations until the next milestone.

A detailed register of a company's equity ownership structure showing all shareholders, their percentage ownership, share classes, options, warrants, and the dilutive effect of each financing round. A clean cap table is essential for fundraising and exit readiness.

The valuation of a company immediately after a new funding round, calculated as the pre-money valuation plus the capital raised. Post-money valuation determines the ownership percentage that new investors receive for their investment.

The International Private Equity and Venture Capital Valuation Guidelines (IPEV Guidelines) are best-practice recommendations, published by the IPEV Board, for measuring the Fair Value of private equity and venture capital investments consistently with IFRS 13 and ASC 820. They apply at investment level: a fund's Valuer uses them to value the fund's holding in each portfolio company at every measurement date — typically quarterly — with one or more of five techniques (multiples, industry valuation benchmarks, available market prices, discounted cash flows and net assets), calibrated to the price of a recent orderly investment.

Flat, Up or Down: Bridge Valuation Mechanics

What is the difference between a SAFE and a convertible note?

SAFEs are simpler, cheaper, and have no maturity date or interest — they convert only at a future financing event. Convertible notes are debt with interest and a maturity date, creating pressure to convert or repay.

What is a SAFE agreement and how does it work?

A SAFE (Simple Agreement for Future Equity) is a financing instrument where investors provide capital in exchange for the right to receive equity at a future priced round, typically with a valuation cap and/or discount.

What is bridge financing and when do companies use it?

Bridge financing is short-term debt or convertible instruments used to fund operations between major equity rounds, typically converting to equity at the next round's valuation.