Simple Agreement for Future Equity (SAFE)

Both SAFEs and Convertible Notes are similar in that they're relatively simple and flexible financial tools.
Investors and startup companies use convertible notes as short-term debt that will convert to equity.
Unlike SAFEs, Convertible Notes contain maturity dates and interest rates. Furthermore, Convertible Notes identify the minimum amount of funds that must be raised by the startup, whereas SAFE doesn't.

There are many convincing benefits of using SAFE notes. They're straightforward, and there the negotiation process is typically shorter.
Simple Agreement for Future Equity allows startups to find their place in the market without going into debt. It also relieves them from time-consuming paperwork, which can involve asking for maturity date extensions and similar.

It's no secret that SAFE notes are often risky for investors. There are no guarantees that their investment will pay off.
That's why these types of agreements are more appealing to seasoned investors who better assess a company's prospects and who can afford to make risky investments.
Furthermore, a SAFE note requires companies to be incorporated, which is often a problem as many startups are LLCs.

While it's true that many startups don't succeed, there are plenty of those that worked out really well. A great feature of SAFE notes is that they don't have minimum requirements.
If there is a company you want to invest in and they offer future equity in exchange for investment, you can create a customized agreement. If all works out well, you'll have the chance to purchase shares in the company at a lower price than others.

A triggering event in the context of Simple Agreement for Future Equity is a specific situation that prompts a chain of actions regarding the terms of the agreement.
Usually, that means that an additional round of company financing has occurred or that they sold the company. It could also happen that an exit event has taken place.
Upon the triggering event, the investor will have the chance to purchase shares or receive payment after the sale of the company. However, it's crucial to point out that a triggering event can be as specific as the terms of the agreements state.