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Convertible notes vs. Safe Notes?

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.

6 Replies

Mike Moyer
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Mike Moyer Entrepreneur • Advisor
Managing Director at Lake Shark Ventures, LLC
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 Piewhen founders take in angel money,but deep down I prefer SAFEs.
Yaniv Sneor
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Yaniv Sneor Entrepreneur
Founder, Mid Atlantic Bio Angels; President, Blue Cactus Consulting, Trustee, ILSE
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.
Ken Berkun
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Ken Berkun Entrepreneur
Entrepreneur
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.
John Butler
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John Butler Entrepreneur
Founder and President at Quantumcyte, Inc, Director of Process Development at Stanford University School of Medicine
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
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Yaniv Sneor Entrepreneur
Founder, Mid Atlantic Bio Angels; President, Blue Cactus Consulting, Trustee, ILSE
Later stage investors want to see a priced round (no SAFE or convertible note).
Jake Diner
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Jake Diner Advisor
Founder and CEO at Elafris
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
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