A SAFE (simple agreement for future equity) is a standardized document used by startup companies for early-stage fundraising. A SAFE investment may convert to equity in the company in a future round of fundraising (Series A, for example) and does not give a SAFE investor a specific number of shares at the time of the investment. The price of shares owned by a SAFE investor are determined in the future round of fundraising.

The terms of a SAFE are intended to be balanced between the interests of the investors, and the founders or existing owners of the company, but a SAFE may not be appropriate for every early-stage company or investor.

The SAFE was created by Y Combinator, a well-known tech accelerator, in 2013.

In Tennessee, as in other states, a SAFE (simple agreement for future equity) is not specifically regulated by state statutes but is governed by general principles of contract law and securities regulations. A SAFE is a financial instrument used by startups during early-stage fundraising to offer future equity to investors without immediately issuing shares. When a startup company uses a SAFE, the investor provides capital to the company in exchange for the rights to obtain equity at a later date, typically during a future equity financing round, such as a Series A. The terms of a SAFE typically include a valuation cap, discount rate, and sometimes a trigger event that converts the SAFE into equity. The conversion terms are often determined during the next significant round of investment. It's important for both investors and companies in Tennessee to ensure that their SAFE agreements comply with federal securities laws and regulations, as well as any relevant state securities laws. Companies should consult with an attorney to ensure that the SAFE is structured properly and that all necessary disclosures are made to investors. Investors should also seek legal advice to understand the risks and implications of their investment.