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SAFE, convertible note or priced equity? Find out in eight questions
Answer eight questions about your round size, investors, timeline and jurisdiction. The tool ranks the three instruments for your situation and explains the trade-offs.
What is a SAFE?
A Simple Agreement for Future Equity gives the investor the right to shares in a future priced round at a cap or discount, with no interest and no maturity. Y Combinator’s post-money SAFE is the default for small US rounds because it is fast and nearly free to execute.
What is a convertible note?
A loan that converts into equity at the next round, usually at a cap or discount, with interest and a maturity date. Common in the UK and Europe and with investors who want a creditor’s protection if no round happens.
When should you do a priced equity round?
When the round is large, a lead investor wants defined rights and a board seat, or you want certainty about the cap table today. It costs more in time and legal fees but sets the valuation and the terms in the open.
What founders get wrong
Treating SAFEs as free money: each one is dilution you only see at the next round. Treating notes as harmless: maturity dates arrive. Treating a priced round as a formality: the terms beyond the valuation decide what you own at exit.
Questions founders ask
Is this legal advice?
No. It is a decision aid. Instruments and tax treatment vary by country; have a lawyer review the documents.
Can I use a SAFE outside the US?
Often yes, but local law may treat it differently. Many countries have an equivalent, such as the UK’s advance subscription agreement.
Where do I get the SAFE template?
Y Combinator publishes the post-money SAFE for free. SeedScope’s annotated walkthrough is on the roadmap.
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