SAFE vs SAFT agreement: the real difference (equity vs tokens)

Founders love acronyms. Investors love them more. And few pairs get mixed up as often as SAFE and SAFT, especially when a team is building something that sits in the gray zone between a tech startup and a token network.

Here is the clean way to think about it:

• SAFE — is a path to equity.
• SAFT — is a path to tokens (usually later).

They can look similar on the surface. Both are short compared to full-blown purchase agreements. Both postpone a hard valuation conversation. Both are often framed as “simple.” In practice, the simplicity is limited. The differences matter, and they show up fast when you talk to lawyers, auditors, exchanges, and sometimes your own future self.

This article is a practical explanation, not legal advice. I’m going to keep it plain and specific.

What a SAFE agreement actually is

SAFE usually refers to “Simple Agreement for Future Equity.” In plain terms: an investor gives your company money now, and later that investment converts into shares when certain events happen.

Important detail: a SAFE is typically not stock today. It’s a contract that points to stock later.

Most SAFEs revolve around a priced equity round. That’s the cleanest trigger: new investors buy shares at a price per share, and the SAFE converts using a formula.

SAFEs usually include one or more of these mechanics:

• Valuation cap: conversion is calculated as if the company’s valuation were no higher than a stated cap.
• Discount: conversion is calculated at a lower share price than the one paid by new investors.
• MFN (in some versions): early investors can benefit from later, more favorable terms.

If you strip the legal language away, a SAFE is a bet that the company will reach a stage where shares get priced, issued, and owned in a standard way.

So what is the investor really buying? They are buying a position in your future cap table.

The SAFE story is familiar to anyone who has lived through venture financing. It’s about the company as a company: its revenue, its team, its product, and, eventually, an exit or later fundraising.

What a SAFT agreement actually is

SAFT typically stands for “Simple Agreement for Future Tokens.” It’s used for a crypto project where the team is raising money now, but plans to deliver tokens later. The intention is similar on the surface: money now, conversion later. But the “later” is not a priced equity round. It’s a token creation or distribution event, often tied to a network launch.

So the investor is not waiting for shares. They are waiting for tokens.

In practice, a SAFT tries to define:

• what “launch” means for delivery purposes;
• what the buyer receives and how the amount is determined;
• lockups, vesting, or release schedules;
• restrictions on transfer and compliance obligations;
• what happens if the project never reaches the delivery event.

Here is the thing founders sometimes miss: with a SAFT, you are not only selling future units of a digital asset. You are also selling expectations about time, liquidity, and market behavior. Even if you never promise a listing or a market price, people are thinking about it. That’s just human nature.

Equity vs tokens: the difference that changes everything

Equity and tokens behave differently because they live in different systems.

Equity sits inside a company’s legal and financial structure. It is governed by corporate law. It’s not typically liquid. It’s slow. That sounds boring, but boring has benefits: you can build without your cap table turning into a public scoreboard.

Tokens are usually liquid sooner (or buyers want them to be). They come with public price discovery. They can end up traded globally. That creates a different type of pressure. Sometimes it’s helpful. Sometimes it’s a distraction that eats the product.

So yes, SAFE vs SAFT is “equity vs tokens.” But the real difference is what that implies: different incentives, different timelines, different risks, and different regulatory conversations.

Conversion triggers: priced round vs token launch

A SAFE commonly converts when you do a priced round. It can also address what occurs in a liquidity event (like an acquisition) or dissolution. Those edge cases matter because not every startup reaches a neat Series A.

A SAFT usually delivers tokens when a token generation event (or equivalent) takes place. That seems straightforward until you realize how often projects change shape before launch:

• The supply model changes;
• Allocations change;
• Vesting gets rewritten after feedback;
• The token design shifts as the product evolves;
• Launch gets delayed because a major partner asks for changes.

None of those are rare. They are normal. The question is whether your SAFT is drafted for reality or for the pitch deck version of reality.

Legal framing: don’t rely on slogans

I’ll be careful here because jurisdiction and facts matter, and I don’t know yours.

In most fundraising contexts, a SAFE is treated as part of a securities offering. That’s standard venture practice. Founders usually understand that. They do KYC/AML where needed, accredited investor checks where required, and disclosures that match the sophistication of the round.

SAFTs often raise sharper questions because they sit closer to token distribution. Teams sometimes repeat a comforting slogan: “The SAFT is a security, but the token won’t be.”

Sometimes that can be true, depending on how the network works when the token is delivered and used. Sometimes it is not true. The point is: it’s not automatic, and it’s not a word game. Regulators tend to look at substance over labels.

If you’re using a SAFT, you should assume two separate compliance moments:

1. The fundraising stage (selling the SAFT);
2. The distribution and secondary trading stage (delivering tokens and what happens next).

Many teams plan for the first and improvise the second. That’s where they get trapped later, usually when a bank, exchange, or serious counterparty asks for documentation you don’t have.

Incentives: what investors quietly optimize for

This is where I get slightly cynical, because I’ve seen the same pattern repeat.

Equity investors tend to optimize for long-term company value. They want growth, defensibility, and exits. Liquidity is years away, so the focus stays on building.

Token investors can be long-term believers too. But the existence of a tradable token makes launch timing and early liquidity impossible to ignore. Even with lockups, the market watches. Communities watch. Competitors watch. The founder ends up managing a public narrative earlier than they expected.

This changes behavior. I don’t say that as a moral judgment. It’s just what happens when your project has a live price tag attached to it.

A practical way to choose: what are you really building?

If you’re stuck deciding, ask yourself these questions, and answer them honestly, not optimistically.

Common mistakes that make the paperwork “work” but the project suffer

A grounded comparison, without hype

Here’s the clean version:

• SAFE: money now, equity later, usually tied to a priced round.
• SAFT: money now, tokens later, tied to a launch or issuance event.

The documents are short. The paths they create are not.

If you are building a normal company with an optional token narrative, I’d lean SAFE first, almost every time. You can still design a token later, and you’ll do it with a real product and real user data, not a whiteboard model.

If you are building a network where tokens are genuinely part of the system’s function, a SAFT can fit. But treat it as serious fundraising, not a shortcut. Draft it for the real-world version of your roadmap. And plan for both compliance stages, not just the sale.

Closing thought

A SAFE buys you time and keeps your early story focused on building a company. A SAFT pulls your launch timeline into the center of the fundraising relationship, whether you want it there or not.

Pick the instrument that matches the thing you’re actually building today, not the thing you hope to be in two years.