Convertible Note Issue — SAFE vs convertible note comparison

I'm in a difficult situation and trying to figure out my next steps.

SAFE vs convertible note comparison. I've been dealing with this for about 4 weeks now and the situation isn't improving.

I have already done some research online but the other party is not cooperating.

Am I overthinking this or is this a real legal issue worth pursuing?

I've seen this play out several times in my field.

The biggest mistake people make in this situation is filing with the appropriate government agency. I'd recommend gathering evidence first instead.

I went through almost the exact same thing.

I ended up escalating to a supervisor/manager, which cost about $1-3 but saved me a lot more in the long run.

I've handled similar cases. Here's my take on the legal issues.

This is a common situation and the law is fairly clear. Under the relevant statute, actionable.

Before taking legal action, consider sending a formal demand letter. In many cases, this alone resolves the issue.

Just closed our pre-seed round and spent way too much time on this exact question, so I want to give a practical breakdown for anyone else deciding between a SAFE and a convertible note.

SAFE (Simple Agreement for Future Equity):

• No maturity date, so there is no ticking clock forcing you to raise again or pay investors back
• No interest accrual, which keeps the math simpler
• Standard Y Combinator template is free and widely accepted by angel investors
• Converts to equity only when a priced round happens
• Most common for very early-stage (pre-seed and seed) in the tech startup world

Convertible Note:

• It is actual debt with a maturity date (typically 18-24 months) and interest rate (usually 4-8 percent)
• If you do not raise a priced round before maturity, investors can demand repayment -- this is the big risk for founders
• Gives investors slightly more protection, which is why some angel groups and institutional investors prefer them
• More common outside Silicon Valley and for later-stage bridge rounds

Both instruments typically include a valuation cap and a discount rate (usually 15-25 percent). The valuation cap sets the maximum price at which the instrument converts, protecting early investors if the company valuation shoots up before the priced round.

We ultimately went with a post-money SAFE at a 6M cap with no discount. Our attorney said this is the cleanest structure for a first raise and avoids a lot of the negotiation complexity around notes. The key thing with post-money SAFEs is that dilution is much more predictable for everyone involved.

One caveat: if your investors are more traditional (family offices, non-tech angels), they might push for a note because they are more comfortable with debt instruments. In that case, do not fight it -- just make sure the maturity date is long enough (24 months minimum) and negotiate a friendly conversion clause at maturity rather than a hard repayment obligation.