Web3 founders quickly learn that fundraising isn’t just about getting cash in the bank. The instrument you choose to raise with will shape your investor relationships, tokenomics, and legal exposure for years to come.
The two most common fundraising contracts you’ll hear about are:
- SAFE (Simple Agreement for Future Equity)
- SAFT (Simple Agreement for Future Tokens)
They sound almost identical, but they work in very different ways. Picking the wrong one can create regulatory risk, investor confusion, and project delays. Picking the right one gives you flexibility, clean legal footing, and stronger investor trust.
This README unpacks everything you need to know:
- What SAFE and SAFT are (and why they exist)
- Key differences founders must understand
- Real-world pros and cons for each
- A stage-by-stage playbook for choosing between them
- FAQs from investors and founders
🚀 Why crypto fundraising is different
Traditional startups raise equity (shares) or debt. Web3 projects raise something in between — capital tied to tokens, which may not even exist at the time of investment.
That’s why contracts like SAFE and SAFT emerged:
- SAFE came from Y Combinator as a way to make early startup funding simpler.
- SAFT was born inside crypto as a way to pre-sell tokens legally before they launch.
Both became standard in Web3 because they bridge the gap between traditional venture capital and tokenized funding.
🔍 SAFE: simple agreement for future equity
Definition: A SAFE is a contract where investors put money in today, and in exchange, they get future equity or tokens when a defined event happens (like a priced equity round or token generation event).
Why it exists: Early startups hate wasting time on valuation fights. SAFE postpones valuation and complex negotiations, letting teams raise faster.
How SAFE works
- You raise capital with a promise of future conversion.
- Conversion happens at a trigger: next funding round or token launch.
- Terms often include discounts (cheaper entry price for early backers) or valuation caps (investor won’t overpay if valuation spikes).
SAFE in crypto
For Web3, SAFE can cover both:
- Equity in the entity running the project
- Future tokens once tokenomics are finalized
This dual option makes SAFE popular when the project is still early-stage, experimental, or pre-token.
🔍 SAFT: simple agreement for future tokens
Definition: A SAFT is a contract where investors put in money today, and in return, they receive only tokens once they’re issued.
Why it exists: Regulators treat token sales as securities in many jurisdictions. SAFT was designed to comply with securities laws by restricting participation to accredited investors and tying token delivery to a clear event (like network launch).
How SAFT works
- Investor buys rights to tokens at a set price.
- Tokens are delivered only after the token generation event (TGE).
- Usually includes vesting schedules to prevent dumping at launch.
SAFT in crypto
It’s the go-to choice for projects that are:
- Token-first (token utility is central to the business)
- Close to launch with tokenomics locked in
- Raising from institutions who expect tokens, not equity
🆚 SAFE vs SAFT: key differences
| Feature | SAFE | SAFT |
|---|---|---|
| What investors get | Future equity or tokens | Future tokens only |
| Best for | Early projects still building | Token-ready projects near launch |
| Conversion trigger | Next priced equity round or TGE | Token generation event |
| Legal complexity | Lower — simple startup doc | Higher — securities scrutiny |
| Regulatory risk | Lower if equity-based | Higher, especially in US/EU |
| Investor profile | Angels, early VCs | Accredited/token-focused funds |
| Flexibility | High — negotiable terms | Lower — more standardized |
| Liquidity | Long wait, no immediate liquidity | Tokens post-TGE (with vesting) |
👥 Who can invest?
Neither SAFE nor SAFT is meant for retail. Both are private fundraising tools restricted to:
- Accredited investors
- Institutional funds
- Crypto-native VCs
If you’re raising from the public (like an IDO or launchpad), you’ll need different agreements such as Token Purchase Agreements or exchange-run frameworks.
✅ SAFE in practice: pros & cons
Pros for founders
- Low cost, fast to close
- Lets you raise before finalizing tokenomics
- More negotiation flexibility
Cons for investors
- High risk (if no next round or token launch, they get nothing)
- Unclear whether they’ll end up with equity, tokens, or both
- No liquidity until later
✅ SAFT in practice: pros & cons
Pros for founders
- Clean promise: tokens only, no messy equity debates
- Works well for token-first projects with launch plans
Cons for founders
- More expensive legal setup
- Harder to adjust terms once signed
- Heavier regulatory exposure
For investors
- Clearer upside: token allocation at TGE
- Still risky if project never ships
🛠️ When to use SAFE vs SAFT
Think of SAFE and SAFT as stage-appropriate tools:
-
Pre-token, still building → Use SAFE
- Tokenomics unclear, product not ready
- Need fast capital to extend runway
-
Token defined, TGE planned → Use SAFT
- Tokenomics reviewed legally
- Roadmap for launch is concrete
- Investors expect allocations
-
Hybrid strategy
- Raise early with SAFE (equity + token rights)
- Closer to launch, switch to SAFT for token investors
📋 Checklist: how to choose
Ask these four questions:
-
Is our token model finalized?
- No → SAFE
- Yes → SAFT
-
Do investors expect equity upside?
- Yes → SAFE
- No → SAFT
-
How close are we to TGE?
- 12+ months → SAFE
- <12 months → SAFT
-
What’s our legal risk appetite?
- Want flexibility & less exposure → SAFE
- Ready for securities review → SAFT
⚖️ Regulatory considerations
- SAFE: Often treated like standard startup equity. Less regulatory baggage if it’s equity-based.
- SAFT: Frequently considered a security. In the US and EU, expect compliance reviews, accredited-only limits, and potential SEC scrutiny.
Many teams underestimate regulatory cost. Even if investors are crypto-native, your legal jurisdiction matters more than your intent.
📚 Case scenarios (hypothetical)
-
Gaming startup, pre-token: Raising $1M to finish development. Tokenomics still evolving. → Use SAFE, promise equity now, tokens later when designed.
-
DeFi protocol with tokenomics ready: Launch scheduled in 6 months, need $3M to cover audits + liquidity bootstrap. → Use SAFT, deliver tokens post-TGE.
-
Layer-2 chain with hybrid needs: Early equity round with SAFE, then SAFT private sale for strategic token buyers before mainnet.
❓ Common FAQs
Q: Can retail investors buy SAFTs?
No. SAFTs are private placements for accredited investors only. Public rounds require different agreements.
Q: Can SAFE include tokens at conversion?
Yes. Some crypto SAFEs include token rights, but it must be clearly drafted.
Q: Which do VCs prefer?
Depends: traditional VCs prefer SAFE (equity). Crypto-native funds often prefer SAFT (tokens).
Q: Can I switch later?
Yes. Many teams raise first with SAFE, then later with SAFT once tokenomics are ready.
🔑 Takeaways for founders
- SAFE = flexible, simple, early. SAFT = token-focused, later.
- SAFE lowers regulatory exposure, SAFT faces heavier scrutiny.
- Both are for private rounds only, not retail.
- Your choice shapes investor trust and your fundraising timeline.
- Many teams use both at different stages.
