SAFE, SAFE+T, and SAFT Crypto Explained

Blockchain startups often utilize specialized fundraising instruments to raise capital and remain compliant with regulatory standards efficiently. Among these instruments are SAFT (Simple Agreement for Future Tokens), SAFE (Simple Agreement for Future Equity), and the SAFE+T (Simple Agreement for Future Equity with Token Warrant). These agreements offer flexibility, regulatory clarity, and tailored financial arrangements, making them popular choices for early-stage crypto and blockchain projects.

This guide dives deep into these fundraising methods to see how each works, their differences, and the process of purchasing future tokens under these agreements.

What is a Simple Agreement for Future Tokens (SAFT)?

A SAFT (Simple Agreement for Future Tokens) functions as an investment contract promising investors future ownership of crypto tokens from developers. SAFT arrangements enable investors to fund crypto projects before the tokens officially launch while reserving rights to these tokens. The contract clearly states the investor’s contribution and the number of tokens they will receive at a discounted rate. Additionally, it identifies a specific date when the developers will deliver these tokens.

Developers first introduced SAFT agreements in 2017, following the rapid expansion of Initial Coin Offerings (ICOs) that attracted attention from the US Securities and Exchange Commission (SEC). SAFT agreements address compliance with US securities laws, offering legal safeguards to crypto investors within the country. Accredited investors utilize SAFT agreements to finance crypto projects, ensuring regulatory compliance. SAFT is subject to US federal law, except in the state of New York, due to state regulations.

What Does a SAFT Agreement Cover?

SAFT agreements outline specific details about the crypto project and transaction between developers and investors, resembling an investor-focused crypto whitepaper. A typical SAFT template includes:

• Total funds provided by the accredited investor to the project.
• The cost each investor pays per token.
• Expected investment return after considering taxes and expenses.
• Number of tokens investors will receive.
• Exact date or schedule for transferring tokens.

Both the investor and the developer agree to the terms detailed within the SAFT, obligating each to fulfill their respective commitments. After filing the SAFT with the SEC, investors advance funds to support the project's development, often long before token delivery.

Once developers finalize the basic functionality and deploy tokens to the blockchain, investors receive their tokens, which can be sold on the open market. As tokens become functional upon delivery, investors avoid securities-related legal risks.

SAFT Investor Requirements

SAFT agreements maintain strict eligibility criteria for investors. Only accredited investors may use SAFT arrangements, limiting access primarily to financially qualified individuals. The SEC verifies each investor's status through IRS records and tax returns and defines an accredited investor as:

• A US resident with a net worth exceeding $1,000,000, excluding their primary residence.
• A US resident with annual income surpassing $200,000 individually or $300,000 jointly for couples, consistently over the previous two years.

Investors failing to meet these criteria cannot participate in SAFT agreements.

SAFT vs ICO

While similar in purpose, SAFTs differ significantly from Initial Coin Offerings. ICOs target broad public participation, whereas SAFTs exclusively focus on accredited investors. SAFT participants must meet criteria related to wealth, income, or investment experience. This exclusivity allows institutional entities, such as hedge funds and banks, to invest without regulatory concerns. Developers benefit from established financial avenues, which enable them to obtain funds for project development ahead of broader ICO involvement.

What is a Simple Agreement for Future Equity (SAFE)?

SAFE (Simple Agreement for Future Equity) agreements enable early-stage companies to raise capital. Investors using SAFEs gain the right to future equity upon specific triggering events such as equity financing rounds, acquisitions, or company sales. SAFEs do not immediately grant equity but convert only when these trigger events happen.

Y Combinator first used SAFEs to raise funds in 2013, and since then, startups have widely adopted variations of this agreement.

How SAFE works

Common SAFE provisions include:

• Pre-money valuation cap: Sets a maximum valuation at conversion, ensuring investors gain more favorable equity pricing.
• Discount rate: Investors receive equity at a discounted rate compared to future financing rounds.
• Trigger events: Include equity financing rounds, company acquisitions, or dissolutions, which activate SAFE conversions into equity or cash distributions.
• Maturity date: Unlike convertible notes, SAFEs do not have maturity dates and remain active until conversion or a trigger event occurs.
• Interest rate: SAFEs do not accrue interest.
• Nominee: A nominee agent acts on behalf of investors, simplifying complex procedures, including voting and conversion decisions.

What is a Simple Agreement for Future Equity with Token Warrant (SAFE+ T)?

The SAFE+T, or Simple Agreement for Future Equity with Token Warrant, is a fundraising mechanism for blockchain startups that may issue tokens in the future. It combines equity investment with a side letter giving investors the option to obtain tokens instead of or alongside equity. These side letters outline different terms based on investor negotiations.

Common methods for issuing tokens under SAFE+T:

• Allocation proportional to equity ownership, including founder pools.
• Allocation based on equity ownership, considering the fully diluted token supply.
• Conversion at a fixed ratio from equity to tokens, such as a 4:1 conversion.

Not all side letters guarantee token allocation. Some only offer the right to purchase tokens at a later date, under set terms. Other variations allow investors to choose between equity, tokens, or a mix of both.

Key differences between SAFT and SAFE

While both SAFE and SAFT facilitate early-stage fundraising for blockchain projects, they serve different purposes. SAFT specifically targets token investments, while SAFE primarily secures equity investments that may later convert into equity or tokens based on triggering events.

Can you buy SAFE, SAFE+T, and SAFT assets?

A vanilla SAFE is an equity-only contract, so it does not give you token rights and cannot be bought or sold under normal circumstances. However, it’s possible to trade tokens under SAFE+T hybrid deals since investors obtain a separate contractual right to future tokens once they are issued.

With SAFT assets, the rights to receive future tokens can be bought or sold, but only through a private, securities-style contract that is normally open only to accredited or professional investors.

Here at Acquire.Fi, we make SAFT and SAFE+T transactions more accessible. Our Web3 OTC Secondaries Marketplace connects qualified investors with SAFE+T and SAFT token holders who want to sell their digital assets. For example, investors can buy SAFT tokens of Sei, a high-speed blockchain specifically designed for DeFi applications, at a discount from the spot price.

To buy SAFE+T and SAFT tokens, individuals must clear KYC/AML checks, prove accreditation, and pay cash or stablecoins up front for the contractual right to receive future tokens. Sign up for an account and buy future tokens today.