SAFEs (Simple Agreement for Future Equity) were once reserved for small kickoff rounds. Raising $500K? Sure, the SAFE makes perfect sense.
These days, however, the SAFE is taking share from the traditional priced round across many round sizes. Last year more than half of rounds that raised $2M-$2.9M happened on SAFEs - and nearly 25% of rounds over $5M were the same.
This is not too surprising, given the two major advantages of the SAFE are closing speed and low cost and both are in high demand these days. But it does introduce some complications:
Most SAFEs have valuation caps but those are not quite the same as valuations - and they could introduce hurdles for the future first priced round if they are set too high.
Multiple rounds on post-money SAFEs come with anti-dilution built into the financing - great for investors, not so much for founders.
Rounds on SAFEs are typically not treated as markups in the valuation policy of most funds. This means that companies could be growing and raising and yet the mark for the original investors seems "stale".
Generally I'm pro-SAFE, although the idea of raising a $5M or even $10M on them makes me slightly uneasy. But perhaps this chart is simply a reflection of priced equity rounds becoming more and more expensive to close. Innovation on that end would be most welcome.
Onwards!
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Peter Walker
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