Simple Agreement for Future Redemption

You invest. In return you hold a claim on the company worth your money times a Multiple that rises on a published schedule elected at issuance. For a typical startup that is the Fixed Pool schedule: 1.50 from the day you invest, with a hard cap of 2.50. The company settles that claim in cash at quarterly windows, as much as it declares it can afford, or you can convert into stock. That is the core of it.

It replaces a deadline that can be missed with a budget set to what the company can afford, on a calendar everyone shares.

Your claim is your unreturned investment times the Multiple. The Multiple follows one of two published schedules, elected once on the first page of the agreement, for the life of the position. For a typical startup that is the Fixed Pool schedule: the Multiple is 1.50 from the day you invest and never below it, holds at 1.50 through month 36, rises to 2.00 at month 60, and is capped at 2.50 from month 90 on. Between the anchors it moves in a straight line, and it never decreases.

The other schedule: Direct Ledger

The second schedule, Direct Ledger, is calibrated for an issuer whose conversions mint ledger-backed units rather than issuing shares from a fixed pool. It opens at 1.00, holds there through month 12, and is capped at 1.60 from month 90. A venture carries one elected schedule across all of its positions, and every Quarterly Update states which one. When and why a company elects it is covered in section 08 below, on companies that are not corporations.

The ways it can resolve

You can join the redemption queue and be paid in cash from the company’s declared budget, pro rata with other holders; the queue opens at month 60, or as early as month 36 if the company opens it. From month 36 the company can also buy you out at the schedule price, and if it does, you may choose to convert the noticed amount instead rather than take the cash. From month 36 you can convert a slice each quarter into common stock at the published Ledger Base price, the path for when you reach the cap and would rather own equity than keep waiting. The company can also extend you a Conversion Offer: an invitation to convert at the Ledger Base price that must state what the converting capital is for, and that you can simply decline; ignoring it declines it, your position is unaffected, and silence never accepts equity. A priced round is different, and better: you can convert the entire position at the round’s own price, less a 20% discount, in a single move rather than the quarterly slice.

On the Fixed Pool schedule the claim stands at 1.5× from day one and holds there through month 36, so early on, waiting adds nothing: the floor was priced in at issuance. From month 36 the claim climbs toward the 2.5× cap, and that is what the figure below shows: the cost added each quarter, as an annual rate, for a position that stays outstanding. The climb is steepest just after month 36, eases at month 60, and falls to zero once the Multiple is capped, at which point the company owes the full amount and it simply stops growing. The company decides quarter by quarter, so the cost is drawn as steps.

Every SAFR company runs on the same four fiscal quarter-ends, which turns reporting into a shared rhythm: the whole network publishes in the same weeks, like an earnings season for companies that never had one.

The numbers in the update are produced by one fixed formula applied to every company, so the market forms an expectation before the company says a word, and the company then meets it, misses it, or beats it. Over time that sequence becomes a quarter-by-quarter capacity history, the kind a SAFE never produces.

The formulas behind a Quarterly Update live in the open Standard. To read one, you mainly need to know what two figures mean.

Ledger Base: the company’s standardized net worth

One fixed formula values what the company owns, the product development it has funded, and its revenue weighted by quality. It is never a negotiated valuation and never uses comparables, so it means the same thing across every company. Every dollar of economic value enters through exactly one category: revenue a company’s own leased-out asset produces, for example, is never counted on top of the asset itself. It sets the conversion price and feeds the capacity figure.

Expected Capacity: what it could prudently pay this quarter

A quarter of free cash flow, after keeping a working-capital reserve. The company’s own declared budget can be more, less, or zero, but when it is less, it must say why. The figure below is the real worked example from the sample Quarterly Update.

A SAFR works for any company, corporation or not. If the company is not a stock corporation, conversion delivers that entity’s version of common: ownership units carrying the same economic rights, with governance set by the entity’s organizing documents. Conversion never produces anything senior: no preferred, no liquidation preference, no special voting or blocking rights.

Some of these entities keep their books in one unit of account. The ledger is stated in it and ownership is denominated in it, so a unit is a direct claim on what the ledger holds. The instrument prints a schedule calibrated for that bookkeeping, named Direct Ledger, elected by checkbox on the first page alongside Fixed Pool. The two names describe two mechanics.

The election is made once at issuance and is independent of the company’s form and tax status. Direct Ledger is simply the calibration built for ledger-denominated structures, which is why you will usually meet it there.

In some of these structures, economics and governance can be held separately. Operators hold both; passive holders hold the economics, and the entity’s documents set how governance is delegated. If you convert into such a structure, your economic claim is the same as common, and your conversion materials state plainly how governance works there. The instrument stays the same for everyone; the structure you convert into is disclosed up front.

One more record sits on the first page, whatever the entity’s form: how the company is taxed. It earns its own section, because taxes are where the SAFE and the SAFR part ways.

The SAFE assumes one kind of company, a Delaware corporation, and says nothing about tax. A SAFR can be issued by any entity, so it writes the tax facts down and keeps the paperwork matched to them. The first page records whether the company is taxed as a corporation or as a partnership, whatever its legal form, including a trust or series taxed that way. It is a record, not a choice, and it is carried in every Quarterly Update, so a change is visible to every holder in the quarter it happens. A change of tax classification alone triggers nothing.

Where the record earns its keep is conversion. When you accept a Conversion Offer, the exchange is executed through a short Conversion Declaration matched to the company’s tax classification, so the paperwork is right for the entity you are converting into, on the day you convert.

The point is not a tax opinion. It is that the tax facts are written down, the paperwork matches them, and nothing about your position turns on a fact you cannot see.

This guide explains an open canonical instrument and is provided without warranty and without legal advice. It is a plain-language companion to theSAFR canonical form (v0.09) and the SAFR Reporting Standard (major version 0); where this guide and those documents differ, those documents control. The instrument and Standard are free to use under their open license (CC BY 4.0, with the schemas under MIT), and the SAFR™ name is reserved for the unmodified canonical terms maintained on a conforming data feed. Consult your own counsel before issuing or accepting any instrument.