"Our local angel / pre-seed investors don't use SAFEs so founders shouldn't ask for them"
Well, maybe. But the data shows otherwise.
We just released our State of Pre-Seed Q3 2024 report for startups raising pre-seed capital. All the latest market information for things like valuation caps, discounts, fundraising tools, dilution, angel checks...lots of charts. Head to the comments for a link to the full thing!
One of the biggest questions I get whenever we put out new info on pre-seed: is all this talk of SAFEs just a Silicon Valley thing? Or are investors across the country actually using these instruments as well?
Data below is from 55,000+ SAFEs and Convertible Notes signed between Jan 2022 and Aug 2024. All signed by pre-priced round startups using Carta (most of those are using our free tier known as Carta Launch btw).
𝗦𝗼 𝘄𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗲 𝗱𝗮𝘁𝗮 𝘀𝗵𝗼𝘄?
It's true that mature venture ecosystems like Silicon Valley and New York use more SAFEs than other parts of the country. But it's pretty clear that SAFEs are the default instrument for pre-seed funding in just about every major metro area across the US.
And if we segmented the data to just 2024, the percentages are even higher.
𝗡𝗼𝘄 - 𝗶𝘀 𝘁𝗵𝗶𝘀 𝗮 𝗴𝗼𝗼𝗱 𝘁𝗵𝗶𝗻𝗴?
There are definitely problems with SAFEs. They don't include many protections for investors should the company in question never raise a priced round. They don't have much in the way of rights attached upfront (although you can solve that with a side letter). They can get overused by founders who should really moved to priced equity instead of raising their third round on SAFEs.
But in general I think they are a net positive for many early-stage ecosystems.
Other quick stats:
SAFEs in 2024: 58% valuation cap only, 34% val cap + discount, 8% discount only.
88% post-money, 12% pre-money
Median post-money val cap for $1M raise is currently $10M
Median discount (when there is one): 20%
Yes, AI companies typically have higher val caps and bigger rounds
No, convertible notes have not made a comeback
Share with your pre-seed founder friends!
#startups #preseed #SAFEs #founders #fundraising
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