SAFE investment were developed in Silicon Valley and are targeted toward Venture Capitalist. The instruments let them purchase the opportunity to become future equity holders in a company if certain events are triggered such as the company goes public or raises a substantial amount of funds.
According to a paper published on it last year, SAFEs have a number of risky features. While they resemble convertible notes, they do not accrue interest. They also do not pay dividends and Shareholders are not granted voting rights. Yet they are increasingly being sold to retail investors through Crow funding offers despite it being designed originally for sophisticated investors.
Retail investors have been warned to tread carefully before putting their money into this risky new type of start-up financing vehicle that may never provide a return on their investments.