This description is from the YC safe user guide. The full guide can be found here: https://www.ycombinator.com/documents/.
In late 2013, Y Combinator introduced the original safe, or the Simple Agreement for Future Equity. At the time of introduction, startups and investors were primarily using convertible notes for early stage fundraising. The original safe was intended to be a replacement for convertible notes, and it has generally been successful in doing so.
More than four years after introducing it, we decided it was time for the original safe to evolve. The most significant change in the new safe is that it is now a post-money convertible security. This change is a response to a shift we’ve observed in the way that early stage companies raise money from investors, which is to treat safe-based financings as independent seed rounds capable of providing multi-year runways, rather than shorter-term bridges to priced preferred stock rounds.
In the new safe, we have also removed the pro rata right that existed as a default option in the original safe. That pro rata right applied to the financing after the round in which the original safe converted (e.g. if the original safe converted in the Series A, the pro rata right applied to the Series B). Instead, we created a standard side letter with pro rata rights that apply to the round in which the safe converts (e.g. if the safe converts in the Series A, the pro rata right applies to the Series A), which can be used if and when the parties agree to it. Although our original goal was to create a universal standard for pro rata rights for all start-up companies, our experience has been that we can’t do this in a way that makes sense for all parties. For example, a company raising $500,000 from 10 angels investing $50,000 often has significantly different considerations than one raising $2,000,000 from a single institutional investor. Also, the pro rata rights contained in the original safe were often misunderstood by both founders and investors as applying to the round in which the original safe converted (the Series A), rather than the round after the one in which the original safe converted (the Series B). So the standard pro rata side letter is an acknowledgment that this right is best handled case by case, and that the prior form of the right often wasn’t what founders and investors were expecting.