A SAFE (Simple Agreement for Future Equity) is a type of financial instrument commonly used in angel investing to fund startups.

It is an agreement between an investor and a company that provides the investor with the right to receive equity in the company at a future date or event, typically a subsequent round of funding, an acquisition, or an IPO.

In exchange for the investment, the investor receives a promise of future equity in the company, with the specific terms of the agreement, including the valuation cap and discount rate, negotiated between the investor and the company.

Compared to traditional equity financing, SAFEs offer a simpler and quicker way to invest in early-stage companies without setting a specific valuation on the company.

They also typically involve fewer legal fees and lower transaction costs, making them an attractive option for both investors and companies.