Simple Agreement for Future Equity
A Simple Agreement for Future Equity (SAFE) is a financing instrument created by Y Combinator. It's an agreement where an investor provides capital now in exchange for the right to receive equity in a future priced round.
An investor gives $500K on a SAFE with a $5M cap. When you raise your Series A at $15M, they convert at the $5M cap, getting 10% of the company.