Hypothetical question
Raising $300K from angels. Some want SAFEs, one wants a convertible note. What's the actual difference and which is better for me as the founder?
Raising $300K from angels. Some want SAFEs, one wants a convertible note. What's the actual difference and which is better for me as the founder?
Late to teh party but wanted to add the VC perspective. When we lead seed rounds, we often see 4-6 SAFEs already on the cap table. The conversion math isn't hard, but what gets messy is when founders have done SAFEs with side letters or non-standard terms.
Biggest red flags we see: (1) SAFEs with pro-rata rights at pre-seed (creates friction at seed), (2) different caps for similar timing (makes investors question your negotiating), (3) uncapped SAFEs from 2021-era (brutal dilution for founders at conversion).
Clean SAFEs at reasonable caps = easy Series Seed. Messy convertible stack = we spend 2 extra weeks on legal and everyone's frustrated.