How does a SAFE work, and can a non-US founder raise on one? Caps, dilution and the local alternatives (2026)

A SAFE is a short contract where an investor pays your company now and gets shares later, when you raise a priced round. It isn't a loan: no interest, no repayment date. The catch for founders outside the US is that the official forms are written for particular countries. Y Combinator publishes them for US companies and for companies formed in Canada, the Cayman Islands and Singapore. Everywhere else, you either use a local equivalent or set up a company that fits the forms.

Everything below comes from Y Combinator's SAFE page, HMRC's manuals and guidance, ASIC and the SEC, checked on 28 October 2026.

How a SAFE works

Y Combinator describes a SAFE as "a short contract an investor signs to fund your startup now in exchange for the right to shares of stock in your startup later." It converts into shares automatically when you raise a priced round, which YC calls an equity financing. YC says it was created there by Carolynn Levy in 2013, and that the post-money version has been YC's standard since 2018.

What it isn't matters as much as what it is:

• Not debt. YC says "A SAFE is not a debt and not a loan": it has no interest and no maturity date. A convertible note, by contrast, accrues interest and has a maturity date.
• Not shares yet. The investor holds no stock until the SAFE converts.
• No expiry. A SAFE stays outstanding until it converts or the company is sold or wound up.
• If you sell the company, a valuation cap SAFE gets the greater of its money back or what it would have received as converted common stock.
• If you shut down, a valuation cap SAFE gets its purchase amount back, after debts and alongside standard non-participating preferred stock.

The terms you'll actually negotiate are few:

YC's advice is to keep the SAFE itself unmodified and put any extra rights, such as pro rata or information rights, in a side letter.

The dilution maths, with real numbers

On a post-money SAFE, the share you sell is the investment divided by the cap. YC's worked example: to raise US$1M while selling 15%, your post-money cap is US$1M divided by 15%, about US$6.7M. Raise only US$500,000 on that cap and you've sold about 7.5%; US$800,000 sells about 12%. YC's SAFE calculator runs your own numbers.

Here's an illustration of what happens at the priced round, ignoring any new option pool:

1. You raise US$500,000 on a US$5M post-money cap. Your SAFE investors will own 10%, and the founders 90%, just before the round.
2. A year later you raise US$2M at a US$10M pre-money valuation, so US$12M post-money.
3. The new investors own US$2M divided by US$12M, about 16.7%. Everyone else is diluted by the same proportion: the SAFE holders go from 10% to about 8.3%, and the founders from 90% to 75%.

Two things YC flags that catch founders out. The post-money cap is "post" all the SAFE money you raise, so stacking several SAFEs dilutes the founders, not the earlier SAFE holders. And the cap is "post" the existing option pool but not any new or bigger pool your priced round adds, which also comes out of the founders' share.

Can a non-US company raise on a SAFE?

Start with the forms. On 28 October 2026, YC's page listed:

• US companies: three post-money SAFEs (valuation cap with no discount, discount with no cap, and uncapped MFN), a pro rata side letter and the SAFE user guide.
• Non-US companies: a valuation cap SAFE and a pro rata side letter each for companies formed in Canada, the Cayman Islands and Singapore. YC's note: "Consult a lawyer licensed in the relevant country before using these."

YC's free Send a SAFE tool, which fills in, signs and sends the form, is open to any company, but "currently supports only US-incorporated companies." Companies in Canada, the Caymans or Singapore download the form and use it with their lawyer.

So if your company is a Pty Ltd, a UK Ltd, a German GmbH or an Indonesian PT, there's no official YC SAFE for it. You have three practical routes:

1. Use your country's own early-stage instrument. That's the ASA in the UK, or a local SAFE or convertible note in Australia (both below). Your local angels will know it, and their tax reliefs may depend on it.
2. Form a company that fits the forms. A US corporation can use the US SAFE, and many US funds and accelerators expect one. Our guide on where to incorporate covers the trade-offs, including running a US company from abroad.
3. Raise a small priced round instead. It costs more in legal fees, but every jurisdiction understands ordinary shares.

If you do use the US SAFE, YC says investors should be accredited, and that your board must approve issuing SAFEs. The SEC's accredited investor tests for an individual, last reviewed on 24 April 2026, include net worth over US$1 million excluding their main home, or income over US$200,000 (US$300,000 with a spouse or partner) in each of the past two years.

UK founders: the advance subscription agreement

The UK's closest equivalent is the advance subscription agreement (ASA). The investor pays now and gets shares at a later round or a longstop date. What makes it matter is tax relief for your angels. Under SEIS, an investor can claim income tax relief on 50% of up to £200,000 a year; under EIS, 30% of up to £1 million (£2 million if at least £1 million goes into knowledge-intensive companies).

HMRC's manuals for EIS and SEIS say an ASA won't be considered suitable unless it:

• doesn't let the payment be refunded under any circumstances
• can't be varied, cancelled or assigned
• bears no interest
• has a longstop date by which the shares must be issued.

HMRC "expects a longstop date to be no more than 6 months from the date the ASA is entered into", and is unlikely to give advance assurance for longer. Relief only starts when the shares are issued. Set a US-style SAFE against that list and it fails twice: it repays the investor if the company dissolves, and it has no longstop date. That's why UK angels claiming relief will want an ASA.

The company side has limits too. HMRC's SEIS page for companies says you can receive a maximum of £250,000 through SEIS, your company must be established in the UK, its gross assets can't exceed £350,000 when the shares are issued, and it must have fewer than 25 full-time equivalent employees.

Australian founders: local SAFEs and the offer rules

There's no YC form for an Australian company. Australian SAFE templates and convertible notes are available from local law firms and investor groups, but they aren't standardised the way YC's forms are, so read each one rather than assuming it works like the US version.

Whatever the instrument, check how you're allowed to offer it. ASIC says a disclosure document (such as a prospectus) isn't required for an offer of securities when, among other exemptions:

• it's a personal offer, offers have been made to fewer than 20 people in the previous 12 months, and the raise won't take the total above $2 million in those 12 months (sections 708(1) to (7)), and you don't advertise it; or
• it's made to people presumed not to need disclosure because of their financial capacity, experience or association with the company, such as sophisticated and professional investors (sections 708(8) to (12)).

Whether your particular SAFE or note counts as a security, and which exemption fits, is a question for an Australian lawyer. So is whether your investors can claim the early stage innovation company tax incentives on it, which the ATO publishes separately.

Which to use

Our bootstrap or raise guide covers whether to raise at all, and YC's own deal terms.