SAFE vs convertible note for startups: fees, control, dilution

last updated: Sep 10, 2025
safe vs convertible note side‑by‑side quick comparison

TL;DR

If you need speed and low legal friction, a post-money SAFE is usually the fastest way to close. If your lead asks for discount, interest, or a hard maturity date, a convertible note fits better. safe vs convertible note is a trade between speed and protection.

How to:
  • Pick speed with a post-money SAFE when time kills deals.
  • Pick protection with a convertible note when investors want discount, interest, maturity.
  • Model dilution before you sign.

Read term sheet vs SAFE for priced-round trade-offs.
Tighten the story with product positioning for startups before you negotiate.
See the B2B case study template to prepare proof for investors.

Glossary

  • SAFE: Simple Agreement for Future Equity. Converts into shares later.
  • Post-money SAFE: Sets investor percentage as investment/cap. No interest, no maturity.
  • Convertible Note: Short-term debt that converts later. Carries interest and maturity.
  • Discount: Percentage price cut at conversion.
  • Valuation Cap: Maximum company value used for conversion.
  • Interest: Annual rate on notes. Usually simple interest.
  • Maturity: Date when a note must convert or be repaid, extended, or renegotiated.
  • ASA: Advance Subscription Agreement. UK equity-like bridge, EIS/SEIS friendly.
  • CLN: Convertible Loan Note. UK loan that converts. Often not EIS/SEIS eligible.

How to choose and paper it

  1. Map your constraints. Runway, round size, investor type, speed.
  2. Pick the instrument. Post-money SAFE for speed. Convertible note for discount, interest, and maturity.
  3. Set economics. Cap or discount. On a note you can have both. Fewer variables close faster.
  4. Set protections. MFN, information rights, side letters. Keep them light.
  5. Draft documents. Use YC post-money SAFE or a standard note via counsel.
  6. Close in tranches. Track every instrument in one tracker.
  7. Update investors. Two-line update after each close. Show remaining allocation.

Reference the YC post-money SAFE primer before you set terms.
See Cooley GO on convertible debt for note mechanics.

Benchmarks

Typical early-stage ranges (directional).
Item
Post-money SAFE (US)
Convertible note (US)
ASA (UK)
CLN (UK)
Speed to close
1 to 7 days with templates
1 to 3 weeks if negotiated
1 to 7 days on platforms
2 to 4 weeks typical
Legal fees (founder)
$1k to $5k simple
$5k to $20k if negotiated
£0 to £2k on platforms
£5k to £15k typical
Discount
None or 0 to 20% if custom
10 to 25% common
0 to 20% possible
10 to 25% common
Valuation cap
Common; fixed % = investment/cap
Common
Less common; often discount only
Common
Interest
None
2 to 8% simple
None
2 to 10% simple
Maturity
None
12 to 24 months
Longstop often ≤6 months for EIS/SEIS
12 to 36 months
Investor protections
Light. Usually MFN only
Stronger. Default and repayment possible
Light. Share issuance required
Debt-style rights possible
What this means
  • SAFEs save time. Notes add protection. UK ASA behaves like a SAFE and targets EIS/SEIS. CLN behaves like a note and often breaks EIS/SEIS.
  • Fees are directional. Complex side letters and re-papers cost more.
Sample math.
Scenario. You raise $1,000,000 now. Series A in 12 months.
A) Post-money SAFE with an $8,000,000 cap. Pre-round ownership = 12.5%. After $6,000,000 new money at $12,000,000 pre, post-round ownership ≈ 8.33%.
B) Convertible note with 20% discount, 6% APR, 18-month maturity. If Series A is $10,000,000 pre with $6,000,000 new money, accrued amount ≈ $1,090,000. Pre-round ownership ≈ 13.63%. Post-round ≈ 8.52%.
Note. Real results depend on exact language and caps.
In 90 seconds, find the bottleneck stopping your first 10 customers. Take the free quiz and get a personalized action plan.
Take the free quiz

SAFE vs convertible note

Pick a post-money SAFE when you need speed, have many small cheques, or the lead is comfortable with simple terms.
Pick a convertible note when a lead insists on discount, interest, maturity, or when you need a hard clock.
Decision rule: speed → SAFE. protection → note.

Templates

  • One-page terms checklist: Round size. Instrument. Cap or discount. Interest. Maturity. MFN. Info rights. Close date. Wires.
  • Counsel email: “Preparing [SAFE/Note] for [$X] with [cap/discount/interest/maturity]. Please send clean templates and key issues. Goal: sign this week.”
  • Investor update snippet: “Closed [$X] on [SAFE/Note]. Total [$Y]/[$Target]. Current cap [$Cap] or discount [%]. Remaining [$Z].”
  • Dilution mini-sheet: use a simple CSV to model your scenario.

Read the SeedLegals ASA guide for UK usage.
Check the HMRC manual on ASAs if you need EIS/SEIS relief.

Risks

  • Stacked convertibles make cap tables opaque. Centralize tracking.
  • MFN can back-propagate better terms. Coordinate language early.
  • Maturity creates pressure. Missed dates force extensions or defaults.
  • UK EIS/SEIS. Prefer ASA for relief. CLNs with interest or redemption often fail.
FAQ
  • You:
    Is a SAFE debt?
    Guide:
    No. It is not debt and has no interest or maturity.
  • You:
    Can I use both a cap and a discount?
    Guide:
    On notes, yes. On post-money SAFEs, most founders use a cap only.
  • You:
    US vs UK names?
    Guide:
    US uses SAFE and convertible note. UK uses ASA and CLN.
  • You:
    Who pays legal fees?
    Guide:
    Usually each party. Some investors ask for a capped founder contribution.
  • You:
    Do these instruments give board control?
    Guide:
    Rarely at seed. Control typically arrives with a priced round.
  • You:
    How long can a UK ASA run?
    Guide:
    Many counsel recommend a six-month longstop to keep EIS/SEIS clean.
Ready to stop guessing?
Book Your Free Strategy Call
© 2025
Telegram
Linkedin
Twitter
If you're a founder choosing between a SAFE and a note,