For founders - here are the terms, trends, and tips for using SAFEs and Convertible Notes in your pre-seed or seed fundraise.
𝟭) 𝗬𝗼𝘂'𝗹𝗹 𝗽𝗿𝗼𝗯𝗮𝗯𝗹𝘆 𝘂𝘀𝗲 𝗦𝗔𝗙𝗘𝘀
As you can see from the chart below, nearly all sectors of the startup ecosystem have moved to SAFEs as the dominant financing choice for pre-priced rounds.
However, more "real-world" industries like Biotech, Energy, and Medical Devices still have heavy Convertible Note influence. Makes more sense to use debt instruments when you're building tangible assets.
𝟮) 𝗗𝗲𝗳𝗶𝗻𝗶𝘁𝗲𝗹𝘆 𝗮 𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗰𝗮𝗽, 𝗺𝗮𝘆𝗯𝗲 𝗮 𝗱𝗶𝘀𝗰𝗼𝘂𝗻𝘁
In terms of the SAFE, eh, terms - they have consolidated around a new standard.
62% of SAFEs on Carta have a valuation cap and no discount.
A further 29% have a valuation cap AND a discount.
8% have just a discount and only a tiny fraction have neither term applied.
So you'll have a val cap for sure, basically.
𝟯) 𝗣𝗼𝘀𝘁-𝗺𝗼𝗻𝗲𝘆 𝗵𝗮𝘀 𝘄𝗼𝗻
85% of the SAFEs signed in 2024 have been post-money SAFEs. YC doesn't even have the pre-money SAFE available on their site (though of course we do at Carta).
Post-money is good: founder & investor certainty, conversion convenience.
Post-money is not so good: anti-dilution comes for free when multiple SAFE rounds happen.
𝟰) 𝗜𝗳 𝘁𝗵𝗲𝗿𝗲 𝗶𝘀 𝗮 𝗱𝗶𝘀𝗰𝗼𝘂𝗻𝘁, 𝗶𝘁'𝘀 𝗽𝗿𝗼𝗯𝗮𝗯𝗹𝘆 𝟮𝟬%
Why do so few people negotiate the discount? Unclear to me. But the data is very straightforward - when there is a discount, it is typically 20% (either SAFEs or Notes, doesn't budge).
𝟱) 𝗧𝗵𝗲 𝗳𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝘃𝗲𝗵𝗶𝗰𝗹𝗲 𝗱𝗲𝗽𝗲𝗻𝗱𝘀 𝗮 𝗹𝗶𝘁𝘁𝗹𝗲 𝗼𝗻 𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻
SAFEs are more popular in Silicon Valley, NYC, and other mature venture ecosystems while Notes still hold some sway in other places. But the trend of convergence on SAFEs is clear no matter the city.
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