Y Combinator Co-founder Paul Graham: U.S. Investors Can Directly Invest Through SAFE Issued by YC System
Y Combinator co-founder Paul Graham pointed out that U.S. investors can directly invest through SAFE issued by the YC system, simply by verifying the company name and amount, as the text is locked to the same set of standard terms.
Stripe CEO Patrick Collison recounted the fundraising experience of a German founder: according to German notary law, investment contracts must be read in full by a notary. Reading a 90-page contract takes a whole day, with notary fees reaching 30,000 euros. The founder's first company was established in Germany, while the second company chose not to register in Germany.
YC launched SAFE at the end of 2013, introduced by partner Carolynn Levy, to replace convertible notes. The document is typically only about five to seven pages long, with no interest, no maturity date, and no repayment obligation, commonly only negotiating a valuation cap; post-money SAFE can instantly calculate the proportion of equity sold. YC claims this tool has been used by nearly all YC startups and many non-YC companies, raising over $15 billion for YC portfolio companies.
YC now has an official tool called "Send a SAFE" that can generate, sign, and send documents in about two minutes. U.S. companies can use three versions of post-money SAFE and optional side letters for pro-rata rights; Canadian, Cayman, and Singapore companies have separate templates. The template header states that both parties agree not to alter the main text except to fill in the blanks, allowing investors to compress due diligence to verifying names and numbers.
YC's standard investment is $500,000: $125,000 in post-money SAFE for 7% equity, and another $375,000 invested in a SAFE with no cap and most favored nation clauses, retaining pro-rata rights for subsequent rounds. This structure contrasts with the lengthy custom contracts in Germany that require mandatory reading.
In market mechanics, U.S. seed round buyers are accelerators and angels accepting standard future equity certificates, while sellers are founders of Delaware C corporations; this round of discussion was triggered by the case of German notary costs, representing an event-driven institutional comparison. Funds flow faster into jurisdictions where text is locked and can be electronically signed. Beneficiaries are early U.S. founders and scalable seed capital, while those under pressure are the continental establishment paths reliant on individual reviews and mandatory notary fees.
Source: Public Information
ABAB AI Insight
YC first released standard Series AA equity documents in 2008, pushed portfolio companies to switch to convertible notes drafted by the same lawyer in 2010, and then in 2013 removed maturity dates and interest from the notes to create SAFE. This path was not a single inspiration, but a continuous process of removing "negotiable terms" from contracts three times: first standardizing preferred stock text, then standardizing convertible debt text, and finally eliminating the debt attributes, leaving only the future equity request rights. Carolynn Levy has written AA documents, notes, and SAFE, with institutional memory retained within the same team.
The money did not flow into a new asset class but into a lower-friction contracting channel. By making the templates public and the sending tool a two-minute process, YC effectively endorsed the standard text with its own batch scale; the hours saved by investors on legal fees directly translate into the number of projects that can be handled simultaneously. The motivation is that accelerators must complete a large number of checks within the same window; personalized contracts would disrupt the batch rhythm. The resource mobilization method is: public documents reduce external lawyer rents, and internal circulation ensures versions are not rewritten, while subsequent $500,000 standard checks tie the template to real money.
Similar structures have already appeared in ISDA derivative master agreements, NVCA later round templates, and standardized terms for U.S. residential mortgages: once the text becomes the industry default, due diligence degrades from "reading the full text" to "comparing differences." Germany's mandatory notary reading turns contracts back into performative rituals, with costs and time positively correlated with page numbers. The U.S. seed round is already in a "control phase"—not controlling company operations, but controlling the signing format; most European jurisdictions remain in the "custom expansion phase," reproducing text for each transaction.
The essence is the re-pricing of transaction costs caused by the overlay of regulation and habit. Mandatory reading pins the pricing of legal services to duration, while standard text pins pricing to network effects. Once enough buyers only recognize one set of sentences, jurisdictions that do not adopt those sentences will lose the velocity of early checks, leading to a migration of company registration locations. The mechanism is not a cultural preference, but rather: when verification costs approach zero, capital will punish any procedures that raise verification costs again.
ABAB News · Cognitive Laws
Standard text is the infrastructure for maximum leverage
Mandatory reading turns law from a tool into a ticket
Capital flows to sentences with zero verification costs