Deal Terms
SAFT Agreement
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Quick Answer
A Simple Agreement for Future Tokens—a pre-functional token investment contract where investors fund development in exchange for tokens delivered at network launch.
What it is
A SAFT (Simple Agreement for Future Tokens) is an investment contract used in the cryptocurrency and blockchain space, modeled after the Y Combinator SAFE. It allows investors to provide capital to a project before the token exists, with the promise of receiving tokens at a future date when the network launches. The SAFT framework was designed to comply with U.S. securities laws by treating the SAFT itself as a security (sold only to accredited investors) while arguing that the delivered tokens—once the network is functional and decentralized—are utility tokens and not securities. The SAFT specifies the discount or valuation cap for token pricing, the delivery timeline, and any vesting or lockup provisions. The SEC has not formally endorsed the SAFT framework, and its legal standing remains debated.
In Practice
An investor contributes $1 million via a SAFT to a Layer 1 blockchain project. The SAFT provides a 30% discount to the public token price at launch. When the network goes live 18 months later with a token price of $1.00, the investor receives tokens at $0.70 each, getting approximately 1.43 million tokens, subject to a 2-year vesting schedule.
Operational context
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Why It Matters
SAFTs became the standard fundraising instrument for pre-launch token projects because they attempt to navigate securities regulations. However, the legal framework remains uncertain, and several projects that used SAFTs have faced SEC scrutiny. Investors should understand the regulatory risk inherent in this instrument.
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Frequently Asked Questions
What is SAFT Agreement in venture capital?
A SAFT (Simple Agreement for Future Tokens) is an investment contract used in the cryptocurrency and blockchain space, modeled after the Y Combinator SAFE.
Why is SAFT Agreement important for startups?
Understanding SAFT Agreement is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does SAFT Agreement fall under in VC?
SAFT Agreement falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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