A Guide To SAFE Notes (2025 Updated)

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So you’re a fresh, new startup and you’re looking to raise capital to expand and grow in Australia.

You may have considered exploring preference shares or perhaps you’ve looked towards your friends and family for funds.

But if you’ve captured the interest of investors, a smart way to finance your venture is by using a Simple Agreement for Future Equity, also known as a SAFE Note.

SAFE Notes were introduced in 2013 by Silicon Valley accelerator Y Combinator and are designed as simple agreements – typically only 5 to 10 pages long. They provide a concise and effective way to bridge your business and your investors in today’s fast‐moving market.

Navigating SAFE Notes may initially seem daunting, but don’t worry – we’ll make it simple (pun intended!) for you.

What Is A SAFE Note?

A SAFE Note allows you to secure investment that will convert into equity at a future date.

If your business is in its early stages and needs to raise funds, a SAFE Note might be the perfect instrument for you.

As of 2025, SAFE Notes have become a key early-stage fundraising tool for many startups, thanks to their combination of simplicity and flexibility.

They are similar to Convertible Notes in that both can eventually convert into equity. However, the primary advantage of a SAFE Note is its streamlined nature – offering flexibility without the complex debt-like features such as maturity dates or interest rates that you’d typically find in a Convertible Note.

How Does A SAFE Note Work?

SAFE Notes allow an investor to be issued shares in a future priced round – meaning there is no need to determine a specific share price at the time of the raise.

Under this arrangement, the investor gains the right to convert their investment into equity when a pre-agreed trigger event occurs.

Typically, that trigger event is a priced equity round – often the next funding round – although conversion may also occur at a liquidity event such as a merger or sale of the company.

The advantage here is that you can defer the valuation of your company to a later date, allowing the market and your performance to determine a fair valuation.

The number of shares the investor will receive depends on the upfront investment and the share price established during the subsequent priced round or liquidation event.

Discount Prices And Valuation Caps

One of the most important features of a SAFE Note is the valuation cap – a limit on the highest price used to set the conversion price.

A discount rate is also common in a SAFE Note, entitling the investor to purchase shares at a reduced price relative to future investors.

If a SAFE Note does not include a valuation cap or discount, it simply converts into equity at the share price of the company’s subsequent round.

These investor-friendly mechanisms not only reward those who believe in your vision but also help create a fair balance between the risk assumed by the investor and the reward they receive.

It’s important, however, to negotiate these terms carefully to ensure that the incentives are balanced with your business’s long-term interests.

Why Should I Use A SAFE Note?

SAFE Notes offer many advantages over other forms of capital raising, primarily due to their inherent simplicity. Below are some reasons to consider using a SAFE Note in Australia.

Simplicity

Using a SAFE Note is far simpler than a Convertible Note. With its limited pages and straightforward terms, it’s much easier to understand. In contrast, Convertible Notes often involve complex debt instrument features that require more negotiation.

Negotiation

Typically, the only points that need negotiation in a SAFE Note are the valuation cap and discount rate – a far cry from Convertible Notes, which also include additional terms like maturity dates and interest rates.

Flexibility

SAFE Notes give startups the freedom to delay valuation until a later, more established funding round. This means you aren’t pressured to determine your company’s worth when it’s still in its infancy.

Not having a maturity date or repayment obligations also provides peace of mind, freeing you from constant concerns over cashflow pressures and the threat of insolvency.

Looking ahead to 2025, the fundraising landscape continues to evolve. Many startups are now pairing SAFE Notes with tailored investor agreements to accommodate rapid growth and market volatility. It’s more important than ever to ensure your SAFE Note complies with current regulatory standards—our insights on legal requirements for starting a business and our contract redrafting services can help you keep your documentation up to date.

What To Take Away…

Using a SAFE Note is a simple yet effective method for small businesses and startups in Australia to raise the capital they need.

They offer an excellent vehicle for establishing early-stage funds and can be issued quickly and efficiently, letting you focus on growing your business.

Remember, staying informed about the latest legal trends is key. For instance, our article on equity financing provides updated insights for 2025, ensuring you make well-informed decisions.

Luckily, we have lawyers in Australia and the UK who are more than happy to help you out.

So, if you’re considering how to best protect your business and refine your funding strategy, give us a call on 1800 730 617 or email us at team@sprintlaw.com.au and we’ll happily help you out!

Adam Watters

Adam is a legal intern at Sprintlaw. He is currently completing his double degree in Law and Commerce at Macquarie University. With interests in contracts and accounting, he is looking to complete further study and gain experience in the area of commercial law.

Tomoyuki Hachigo

Tomo is the co-founder of Sprintlaw and a commercial lawyer with a broad range of legal experience. Before starting Sprintlaw, he was an M&A lawyer at a top-tier law firm advising businesses of all sizes from large corporates to startups.

Abinaja Yogarajah

Abinaja is a the legal operations lead at Sprintlaw. After completing a law degree and gaining experience in the technology industry, she has developed an interest in working in the intersection of law and tech.