A SAFE, or Simple Agreement for Future Equity, is a financial instrument used by early-stage startups to raise capital from investors. It's essentially a contract between an investor and a company, where the investor provides funding to the company in exchange for the promise of potential future equity if certain predefined events occur, typically a future-priced equity round or an acquisition.

The SAFE was introduced by Y Combinator, a renowned startup accelerator based in Silicon Valley, in 2013. It was created as an alternative to convertible notes, which were commonly used for early-stage fundraising but had certain limitations and complexities, especially for startups and investors.

Convertible notes typically involve accruing interest and maturity dates, which can create complications for both parties. Y Combinator sought to simplify the fundraising process and address these concerns by introducing the SAFE.

The SAFE gained popularity quickly due to its simplicity, flexibility, and investor-friendly terms. It provided startups with an efficient way to raise capital without the need for complex negotiations over valuation, while also offering investors the potential for future equity upside.

Over time, the use of SAFEs has become widespread in the startup ecosystem, with many other accelerators, investors, and startups adopting them for early-stage financing rounds. This is because of their simplicity compared to the other forms of financing. 

Here's a breakdown of how a SAFE typically works:

1. Investment: The investor provides capital to the startup at an early stage. This investment is usually made in the form of a convertible note, which later converts into equity or, in the case of a SAFE, the promise of equity at a future date.
2. No Valuation: Unlike traditional equity financing, a SAFE does not require the startup to be valued at the time of investment. This eliminates the need for negotiating a valuation, which can be challenging for early-stage companies with uncertain future prospects.
3. Conversion Trigger: The SAFE specifies certain triggering events that will lead to the conversion of the investment into equity. Common triggers include a future-priced equity round (such as a Series A financing) or an acquisition of the company.
4. Conversion Mechanics: When the triggering event occurs, the SAFE converts into equity according to predetermined terms specified in the agreement. These terms may include a discount rate or a valuation cap, which incentivizes early investors by providing them with favourable terms compared to later investors.
5. Risk for Investors: Since the valuation of the company is not determined at the time of investment, there's a risk that the investor's stake could be diluted if the company's valuation increases significantly before the conversion event. However, the discount rate and valuation cap help mitigate this risk to some extent. 

A comparison of the SAFE (Simple Agreement for Future Equity) with other forms of financing. 

1. Convertible Notes:Similarities: Convertible notes and SAFEs both offer a way for startups to raise capital without immediately determining a valuation. They both typically convert into equity at a later financing round.
   Differences: Convertible notes often come with interest rates and maturity dates, which can complicate the terms of the agreement. SAFEs, on the other hand, have simpler terms and don't involve accruing interest. Additionally, SAFEs tend to be more founder-friendly in terms of conversion mechanics, offering features like valuation caps and discount rates that protect early investors.
   
2. Equity Financing:Similarities: Like SAFEs, equity financing involves selling shares of the company to investors in exchange for capital.
   Differences: Equity financing requires the startup and investors to agree on a valuation at the time of investment, which can be challenging for early-stage companies with uncertain future prospects. SAFEs eliminate the need for immediate valuation, making them more suitable for early-stage startups. Additionally, SAFEs typically involve simpler documentation and lower transaction costs compared to equity financing.
   
3. Venture Debt:Similarities: Venture debt provides startups with financing in the form of loans, often alongside equity financing rounds.
   Differences: Unlike SAFEs, venture debt requires repayment with interest, which can create financial obligations for startups, especially if they're not generating significant revenue yet. SAFEs, on the other hand, don't involve repayment or interest, offering more flexibility and less financial pressure on startups.
   
4. Grants and Bootstrapping:Similarities: Grants and bootstrapping involve funding a startup without giving up equity or taking on debt.
   Differences: While grants and bootstrapping can be valuable sources of capital, they may not provide enough funding for startups to scale rapidly. SAFEs offer startups access to larger amounts of capital from investors while still preserving equity and avoiding debt.
   

Why SAFEs have become popular compared to these other forms of financing:

1. Simplicity: SAFEs are known for their simplicity compared to other financing options. They involve straightforward terms and documentation, making the fundraising process quicker and easier for both startups and investors.
2. Flexibility: SAFEs offer flexibility in terms of valuation, allowing startups to raise capital without the need for immediate negotiations over company valuation. This is particularly beneficial for early-stage companies with evolving business models and uncertain future prospects.
3. Founder-Friendly Terms: SAFEs often include terms that are favourable to founders, such as valuation caps and discount rates, which protect early investors and incentivize them to provide capital at an early stage.
4. Lower Transaction Costs: Since SAFEs involve simpler documentation and fewer negotiations compared to equity financing, they generally result in lower transaction costs for startups.
5. Alignment of Interests: SAFEs align the interests of founders and investors by providing both parties with incentives for the startup's success. For example, valuation caps and discount rates incentivize early investors to support the startup's growth and eventual success.
6. Widespread Adoption: The popularity of SAFEs has been fueled by their widespread adoption in the startup ecosystem, particularly by prominent accelerators like Y Combinator. This has established SAFEs as a standard fundraising tool for early-stage startups, making them more accessible to entrepreneurs and investors alike.

Overall, SAFEs have become popular due to their simplicity, flexibility, and founder-friendly terms, making them an attractive option for early-stage startups looking to raise capital efficiently while preserving equity and avoiding the complexities of traditional financing methods.