SAFE or priced round? What each one costs you.
Two ways to sell shares in your company. One is fast now and decides your dilution later. The other is slower and settles everything up front.
The short answer
Use a SAFE when the round is small, the investors are angels or seed funds, and speed matters. Expect a priced round when a lead writes a large check and wants a board seat and full investor rights.
SAFE · Days
- Agree a cap
- Sign
- Money in
- Converts later
Priced round · Weeks to months
- Term sheet
- Diligence
- Legal documents
- Close
Compare the options
Speed
SAFE: Days
Priced round: Weeks to months
Legal cost
SAFE: Low; standard template
Priced round: Higher; negotiated documents
Valuation
SAFE: Set later; a cap limits it
Priced round: Set now
Board seat
SAFE: No
Priced round: Often, for the lead
Your dilution
SAFE: Known only at conversion
Priced round: Known on closing
Best when
SAFE: Small rounds, many small checks
Priced round: A lead sets terms for a large round
How a SAFE turns into shares
A SAFE converts when you raise a priced round. The investor gets shares at the lower of the cap or the discounted round price. With a post-money cap, their ownership is simply the check divided by the cap: $1.5M on a $10M post-money cap is 15%.
When investors push for a priced round
Leads writing a large share of the round usually want a priced round: a board seat, protective provisions and a clean cap table. If several SAFEs are stacking up, a priced round also shows everyone what they own.
Questions to ask before you sign
- Is the cap post-money or pre-money?
- Is there a discount as well as a cap?
- Does the SAFE give pro-rata rights or a side letter?
- What do all my SAFEs add up to at conversion?
Terms to know
Valuation cap
The highest valuation a SAFE converts at.
Discount
A percentage off the next round's price.
Pro-rata
The right to keep your percentage in later rounds.
Does your deck justify the cap you're asking for?
Investors test the cap against your traction, team and market. Upload your deck and we tell you where the case is thin.
Questions founders ask
Can I mix SAFEs and a priced round?
Yes. SAFEs convert in the priced round, alongside the new investors.
Is the YC post-money SAFE the standard?
It is the most common SAFE template in US early-stage rounds. Read every term anyway; side letters can change what you agreed.
Sources
Sources: YC post-money SAFE user guide; regulator definitions. Not legal advice.
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