Startup Capital Raising with SAFE Notes

A SAFE (Simple Agreement for Future Equity) note is an instrument introduced by YCombinator, an accelerator based in Silicon Valley. The model was developed as an alternative to convertible bonds or notes, a type of bond which converts a specified number of shares into equity. Though convertible notes and SAFE notes are both forms of hybrid security with debt and equity features, SAFE notes are being hailed as simpler and more convenient to use. 

Due to its’ relative newness and infrequent use in the Australian startup ecosystem, some founders are hesitant to approach SAFE notes. Despite concerns, SAFE notes are gaining popularity as alternatives to convertible notes. At Allied Legal, we have decoded some of the mysticism of SAFE notes. We highlight the uses, key features and benefits below: 

What is a SAFE Note?

A SAFE note is an instrument which founders can issue in exchange for capital, which gives investors the right to purchase stock in the company at a later date subject to the parameters of the SAFE. SAFE shares are of undetermined value in exchange for equity, meaning no share price is determined at the time of the capital raise. Instead, investors can convert the shares into equity when a trigger event occurs or during the next round of funding. If the startup never reaches the trigger event, no shares are allocated.   

Under a SAFE note agreement, founders can issue valuation caps. In Australia, some SAFE notes do not require a valuation cap, however where a valuation cap is provided for, the valuation cap will have a maximum number at which can be converted. Startups can also issue discount rates, enabling investors to buy shares at a reduced rate. This incentivises investors to offer capital during a startup’s infancy. To ensure that you are offering suitable discount rates, it is recommended that you consult a startup lawyer.


  • Simplicity: SAFE notes are concise and simplistic. The documentation is typically between 5-10 pages and simple to prepare, particularly if you consult a startup lawyer to assist you with the process.
  • Flexibility: Unlike convertible notes, a SAFE note is not a debt instrument. Startups are not required to pay interest and there is no maturity date or repayment obligation. This flexibility means that startups can operate without limitations and fears of insolvency.

The newness of SAFE notes, in addition to concerns surrounding an investors control over the timing of the capital raising, means that it is yet to gain significant traction in Australia’s startup ecosystem. Despite this, SAFE notes continue to increase in popularity due to its simplicity and flexibility. SAFE notes are particularly beneficial for early-stage startups, who want to delay valuing their startup. If you need further guidance on how to best employ SAFE notes, you can speak with a startup lawyer

Need Help?  Contact Us  

At Allied Legal we ensure that startups receive the best outcomes when dealing with investors. If need assistance drafting a SAFE note or if you need advice on capital raising, give us a call on 03 8691 3111 or send us an email at

You might also like our article Leveraging Startup Culture for Success.  

Related Articles


How to Pitch Your Startup to Investors

Learn how to craft a compelling startup pitch that captivates investors with our comprehensive guide. From structuring your narrative to showcasing market potential and financial projections, master the art of persuasion and data-driven storytelling to secure funding for your entrepreneurial journey.

What are Director Duties

Are you a director of a company? Understanding directors' duties is critical to your success and the success of your company. Chester James breaks it down in detail, covering everything from strategic oversight to ethical practices and legal obligations. As a director, you are responsible for acting in the best interests of the company and ensuring compliance with the duties imposed on you as a director. Learn what is required of you as a director and how you can fulfill your duties effectively to contribute to the company’s success

What is a Shareholders Agreement?

Understanding what a shareholders' agreement is just got easier, thanks to Chester's latest blog. Tap into simplified insights on roles, rights, and essentials for every investor. You're one read away from clarity.


Subscribe to our newsletter to receive exclusive offers and the latest news on our products and services.

First Name
Last Name
Email Address

Need some help?

If you need assistance, why not book a call with us today? Or fill out the form below to book in for a free confidential consultation.