The key insight this week
The SAFE handles the lion's share of pre-seed fundraising these days. But this "simple" instrument comes in a variety of subtypes—what's currently in vogue?
First off, the post-money SAFE continues to dominate the pre-money version. This is likely down to the power of defaults, as the original YC SAFE was post-money and many founders just use that out-of-the-box.
Considerations beyond the pre or post discussion turn towards the conversion terms. These govern the rules by which this convertible security will turn into equity at the next priced round.
Valuation caps are essentially ubiquitous at this point (appearing in 93% of all SAFEs in Q1). Discounts, however, exhibit two distinct patterns depending on whether the SAFE in question is pre-money or post-money. Pre-money SAFEs are much more likely to also include a discount conversion term.
SAFEs with discounts alone comprise 6% of the total market, while SAFEs with neither conversion term are super rare.
Founders looking to get more familiar with SAFEs should check out our free SAFEs calculator. It's crucial to make sure you aren't caught off guard by potential dilution when you end up raising your priced round in the future.
Stay SAFE out there!
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Peter Walker
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