Entrepreneurship · Startups

Convertible notes vs. Safe Notes?

Angel Otero Consultant en Freelance IT Consultant & Service Provider

September 15th, 2016

Seems like Y Combinator really made the Safes become very popular in the past two years. I still have my doubts as to which form will be better to raise financing at a seed stage. Appreciate your responses here.

Jake Diner Founder and CEO at Elafris

September 15th, 2016

keep in mind legal work for SAFE will costs less than for a convertible note. So when raising capital for preseed/seed round - start with SAFE, if investors push back then ago with convertible. For the priced round use Series Seed documents much cheaper than a typical equity docs

John Butler Founder and President at Quantumcyte, Inc, Director of Process Development at Stanford University School of Medicine

September 15th, 2016

In my experience it is going to be a negotiation point. In general, friends and family or seed investors will take SAFEs at less than $250K. Greater than $250K people typically want convertible notes. Later stage investors like to see SAFEs.

Yaniv Sneor Founder, Mid Atlantic Bio Angels; President, Blue Cactus Consulting, Trustee, ILSE

September 15th, 2016

Later stage investors want to see a priced round (no SAFE or convertible note).

Ken Berkun Entrepreneur

September 15th, 2016

I have no idea why an investor would choose a SAFE over a convertible note, the SAFE is great for the entrepreneurs however.  so if you can get an investor to agree, then go for it.

Yaniv Sneor Founder, Mid Atlantic Bio Angels; President, Blue Cactus Consulting, Trustee, ILSE

September 15th, 2016

The issue of SAFE's and convertible notes, in general, garnered a lot of heated debate at the last Angel Capital Association meeting.  They are not popular with many professional investors and groups - for many reasons.  The general consensus was that they were effective tools for earlier, pre-angel rounds.

Mike Moyer

September 15th, 2016

They key difference is that SAFEs aren't loans so they don't appear on balance sheets. This is helpful if you ever want to take out a loan. SAFEs are a good thing. 

I recommend either to users of Slicing Pie when founders take in angel money, but deep down I prefer SAFEs.