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?
Resurrecting this thread because I just went through this exact situation. Closed a $400K pre-seed in November — mixed SAFEs and one note.
The investor who wanted the note was putting in $150K (our largest check). His lawyer insisted on the note for QSBS eligibility clarity. We negotiated 5% interest, 24-month maturity, same $6M cap as the SAFEs. Honestly wasn't that painful.
The one thing I'd warn about: make sure your note and SAFE caps are identical. We almost had a situation where the note investor wanted a lower cap "because notes have interest" — don't let that argument fly. The interest IS the compensation for the note structure.
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.