Why It’s Time to Rethink SAFEs for Africa’s Startup Ecosystem

Why post-money SAFEs may be hurting African founders and investors—and how we can fix them.

The Simple Agreement for Future Equity (SAFE) was designed to make early-stage fundraising simpler, faster, and more founder-friendly.

And in some ecosystems, it does exactly that.

But in Africa, the standard SAFE—especially the post-money variant popularized by Y Combinator—is quietly creating avoidable problems. Founders are getting diluted before they’ve even hit product-market fit. Investors are sitting on “equity-ish” promises that may never materialize into actual shares. And both parties are often unaware of the implications until it’s too late.

This isn’t a call to abandon SAFEs. It’s a call to adapt them—intelligently—for the African context.

1. The SAFE’s Original Purpose—And What’s Changed

When YC launched the SAFE in 2013, it was a smart fix to a real problem: early-stage startups needed capital, but traditional convertible notes brought legal complexity and risks around interest rates and maturity dates.

The SAFE eliminated those pain points. It was meant to be simple, quick, and fair.

But in 2018, YC introduced the post-money SAFE, which shifted the economics.

With post-money SAFEs, investors receive a fixed percentage of ownership based on the valuation cap and investment amount, regardless of what happens in later rounds. The key point: future SAFEs don’t dilute earlier ones.

This change was designed to give investors more visibility into their ownership, which in high-velocity fundraising environments (like Silicon Valley) makes sense. But when transplanted into slower, capital-scarce markets like Africa, it breaks.

2. How Post-Money SAFEs Hurt African Founders

Here’s the problem: in Africa, capital is harder to raise, takes longer to close, and is often raised in multiple bridge rounds before a priced equity round happens.

In that context, post-money SAFEs can unintentionally trap founders in a dilution spiral—especially when:

• A founder raises multiple SAFEs in close succession;

• Valuations increase only marginally across rounds;

• The business is still in pre-revenue or pre-scale mode.

Why this matters:

Let’s say a founder raises $100k on a post-money SAFE at a $1M cap. The investor is guaranteed 10% ownership at conversion. Now the founder raises another $200k six months later at a $2M cap.

You’d expect dilution to be shared across all existing stakeholders. But the reality is: that new SAFE dilutes only the founder and common shareholders, not the earlier SAFE holder.

Result? The founder gives away more and more of the company—without realizing how quickly the cap table is eroding—because each new SAFE is stacking dilution only on them.

In high-velocity ecosystems, this gets corrected at the next priced round. But in Africa, that next priced round might take 18–24 months—or never come at all. By then, the founder may be down to low double-digit ownership… in a startup that’s still pre-Series A.

That’s not just bad economics—it’s demoralizing.

3. Why Investors Should Also Be Concerned

On the surface, post-money SAFEs look great for investors. Fixed percentage. Clear ownership. No need to worry about being diluted by later SAFEs.

But here’s the catch: many SAFEs never convert.

By design, SAFEs only convert into equity at a “conversion event,” which usually means:

• A priced equity round;

• An acquisition;

• An IPO.

If none of these happen—and in Africa, they often don’t for years—investors are left holding a legal promise without equity rights.

That means:

• No voting rights;

• No board representation;

• No pro rata rights;

• No real leverage.

And for institutional investors or funds with audit, reporting, or lifecycle constraints, this becomes a serious problem. SAFEs can’t be marked as equity on the books. They don’t create enforceable ownership. And without clarity on exit or conversion, the SAFE turns into a floating claim with no clear resolution date.

In a continent where exits are rare, and liquidity windows are unpredictable, that’s a problem.

4. The “Investor Protection” Tradeoff: A Silicon Valley Overcorrection?

As Silicon Hills Lawyer puts it: post-money SAFEs over-index on investor protection in ways that are often excessive and unnecessary.

They’re a response to a very specific set of U.S. market conditions:

• Overheated seed rounds;

• Aggressive bridge rounds;

• Rapidly rising valuations.

The post-money SAFE was YC’s way of saying: “We don’t want our investors to get diluted if our startups raise again before the Series A.”

But this creates hardwired incentives that misalign founders and early-stage capital in places where capital is scarce and growth is gradual.

In short: post-money SAFEs assume too much scale too quickly—and penalize those who don’t grow in a Silicon Valley-shaped curve.

That’s most African startups.

5. What We Can—and Should—Do Differently

We don’t need to throw the SAFE out. But we need to adapt it.

Here are practical ways to fix the disconnect:

A. For Founders

• Understand the dilution math: Post-money SAFEs may look simple, but they stack in ways that can erode your ownership far more than priced equity would.

• Negotiate dilution-sharing mechanisms: If you must raise multiple SAFEs, try to cap total dilution across rounds, or adopt modified versions where later SAFEs dilute earlier ones proportionally.

• Use pre-money SAFEs or convertibles instead: These dilute more fairly across the cap table and may align better with slower growth trajectories.

B. For Investors

• Ask for voluntary conversion rights: If a priced round doesn’t happen after X years, or if revenue or valuation hits certain milestones, give yourself a trigger to convert.

• Request shadow equity or pro rata rights: These don’t require full conversion but provide economic exposure and optionality.

• Push for governance hooks early: Whether through advisory roles, observer seats, or convertible instruments with step-up rights, ensure you’re not sidelined indefinitely.

C. For Legal and Ecosystem Builders

• Educate founders and investors on the long-term consequences of different SAFE structures.

• Standardize better-aligned local templates with optional clauses for voluntary conversion, fair dilution sharing, and multi-round stack tracking.

• Track market usage and iterate—don’t blindly adopt U.S. templates if they don’t work on the ground.

6. Conclusion: We Need African Instruments for African Realities

The YC SAFE was a brilliant innovation for its time and place.

But no instrument—no matter how elegant—is immune to context.

Africa’s startup ecosystems are structurally different:

• Capital is scarcer;

• Timelines are longer;

• Scale looks different.

It’s time we stopped importing legal structures without modification.

We need early-stage instruments that reflect our fundraising pace, our liquidity cycles, and our growth pathways. The goal isn’t to throw out SAFEs. The goal is to make them fit for purpose.

Founders deserve protection from excessive, hidden dilution.

Investors deserve clear paths to equity and upside.

Let’s build smarter instruments—ones designed for here, not just there.