Founder education

Video series: How SAFEs and convertible notes work

June 9, 2021
Josh Durst-Weisman
Weighing fundraising options as a startup founder can be overwhelming, especially when you’re trying to decide between different fundraising instruments like SAFEs and convertible notes.

In this three-part video series, we give a detailed breakdown of the differences between SAFEs and convertible notes, as well as the potential advantages and disadvantages of each.

Part 1: How SAFEs and convertible notes work

In the first episode, we provide an overview of how SAFEs and convertible notes work, as well as the high-level pros and cons of each.

Part 2: Valuation caps and conversion discounts

Now that we understand the main differences between SAFEs and convertible notes, we dig a little bit deeper to understand the specific pieces of each. We discuss how valuation caps and conversion discounts work, and learn how they incentivize investors to risk their money on your company at such an early stage.

Part 3: The difference between pre-money and post-money SAFEs

If you’re fundraising on a SAFE, your investors might have a preference about the valuation cap—will it be calculated on a pre-money basis, or a post-money basis? In episode 3, we explain the differences between each, and why it matters to your ownership dilution over time.

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