SAFE round documents for angel investors

The documents in a SAFE round for angel investors are the SAFE agreement itself, any side letter (most often a pro rata right), an investor questionnaire or accreditation confirmation, the board consent approving the SAFEs, and the securities filings that follow: Form D with the SEC and notice filings in the states where your investors live. Before signing, angels usually want the deck, the current cap table and a short set of company papers. After closing, the founder’s job is to keep a clean ledger so the SAFEs convert without argument.

What does an angel need to see before signing a SAFE?

Angels write smaller checks than funds and rarely run a long review. Most still want to confirm a few basic facts. The less you make them ask for, the faster the money arrives.

An angel’s own lawyer, if they use one, will look at the SAFE form and the cap table first. That is why those two are worth getting right before the first conversation.

Which SAFE form should you use?

Most US angel rounds use the post-money SAFE published by Y Combinator. It comes in a few versions: a valuation cap without a discount, a discount without a cap, and a most favored nation version with neither. There is also a separate pro rata side letter.

The choice of version matters less than consistency. A round where every angel signed the same cap-only SAFE is easy to model and easy to explain. A round with four caps, two discounts and three side letters can still close, but every later investor will ask you to walk them through it.

One feature of the post-money SAFE surprises founders: each new SAFE dilutes the founders, not earlier SAFE holders, because each holder’s percentage is fixed at its cap. Run the numbers before you agree a cap with the next angel.

The SAFE conversion calculator explains the method in more detail, and the SAFE round page covers the documents a lead SAFE investor expects when a fund rather than an angel writes the largest check.

What does each angel sign?

For each investor, the signing set is short:

1. The SAFE. Signed by the investor and the company, with the purchase amount and the investor’s legal name. If the investor is investing through a trust, LLC or retirement account, the SAFE should name that entity, not the person.
2. Any side letter. Pro rata or information rights, signed at the same time.
3. An investor questionnaire. A short form where the investor confirms accredited status and gives the details needed for filings, such as state of residence.
4. Wire details back to you. Not a signed document, but keep the confirmation of funds received against each SAFE.

An e-signature tool keeps this tidy. Whatever you use, save the fully signed version, not just the email chain.

Why does accredited investor status matter?

A SAFE is a security. Selling it needs an exemption from SEC registration, and most angel SAFE rounds rely on Rule 506(b) of Regulation D. Under 506(b), a company can sell to an unlimited number of accredited investors without general solicitation, and to no more than 35 non-accredited purchasers in a 90-day period, who then must receive extensive disclosure. In practice, nearly every startup round sells only to accredited investors.

For individuals, the main tests in Rule 501(a) are income above $200,000 in each of the last two years ($300,000 with a spouse or spousal equivalent) and a reasonable expectation of the same in the current year, or net worth above $1 million excluding the primary residence. Holders of certain securities licenses (Series 7, 65 and 82) also qualify. The SEC’s accredited investor page sets out the full definition.

If you advertise the round publicly, for example by posting it on social media, the round would generally need to rely on Rule 506(c) instead, which requires the company to take reasonable steps to verify that every buyer is accredited. A self-certified questionnaire is usually not enough on its own for 506(c). Speak to your lawyer before announcing a raise.

Which filings follow a SAFE round?

The filings are the part of a SAFE round most often missed, because nothing happens immediately if you forget them. They come up later, when a Series A lead’s lawyer asks for them.

• Form D. Filed online with the SEC no later than 15 calendar days after the first sale in the offering. If the date falls on a weekend or holiday, it moves to the next business day. The SEC’s Form D guidance explains how to file and when to amend.
• State notice filings. Rule 506 offerings are covered securities, so states cannot require registration, but many require a notice filing and a fee, usually by reference to the investor’s state. Many states accept these through the electronic filing system run by the state securities regulators’ association. Requirements and fees vary by state and change from time to time.
• Board consent. The board approves the issuance of the SAFEs, ideally before the first one is signed.

A missed Form D can usually be filed late. It is still better to have it in the room with its filing date than to explain it later.

Who in the round should see which files?

A SAFE round may include angels who are close friends, a more professional angel who leads, an advisor running a syndicate and the occasional lawyer. Not everyone needs to see everything. A simple permission plan keeps sensitive files with the people who need them.

You can run this from a careful shared folder for a handful of angels. Once there are more readers, a data room gives you per-person access and a record of who opened each file. The startup data room pricing guide shows what a two or three month SAFE round costs in a paid room.

What should the SAFE ledger look like?

The ledger is the document that saves you most time later. It is a simple table, kept from the first SAFE, with one row per instrument: the investor’s legal name, the date signed, the amount, the cap and whether it is post-money, any discount, any MFN, any side letter, the date funds arrived, and a link to the signed PDF.

When the priced round comes, the new lead will build a pro forma cap table from that ledger. If it is accurate and every row links to a signed document, conversion is a short conversation. If not, it becomes a reconciliation project in the middle of a closing.

How do you run the close?

SAFE rounds often close one investor at a time over weeks. That flexibility is useful, but it makes discipline matter more.

After the last angel signs, send everyone a short note with the final amount raised and the date of the next update. That one email answers most of the questions angels would otherwise send you individually.

What problems do later investors find in SAFE rounds?

When a seed or Series A lead reviews a stack of angel SAFEs, the same issues come up:

• SAFEs signed in a founder’s personal name instead of the company’s.
• A cap promised by email that differs from the signed document.
• An MFN SAFE whose holder was never told about a later, better SAFE.
• Pro rata side letters nobody remembered until the lead tried to allocate the round.
• No Form D, or a Form D that was never amended as the round grew.

Each of these is fixable, but each takes time from your lawyer and from the lead’s. Our guide to seed round due diligence documents covers what a seed lead checks once these SAFEs come up for conversion.