SAFE, Convertible Note or Priced Round: Structuring an Early-Stage Raise

9 min read

Dariia VasylievaFounder & CEO, GETVISION

Use a post-money SAFE when you are raising a small round fast, from investors who know the form, in a jurisdiction where it works. Use a convertible note when investors need a creditor's claim or local law makes a SAFE awkward. Use a priced round when the amount justifies the legal cost or a lead investor wants governance rights now.

The choice looks like paperwork. It is not. It decides how much of the company you still own at Series A, whether a foreign investor's lawyer signs off, and how long the next round takes to close.

In the US the market has largely decided: SAFEs made up a record 90% of pre-seed rounds on Carta in Q1 2025, with convertible notes taking the other 10%. Outside the US, the answer depends on where the company is incorporated. That is why the instrument belongs inside your investment readiness work, not after it.

Key takeaways

A post-money SAFE fixes each investor's ownership at signing, which is simple for investors and expensive for founders who keep issuing more.
A convertible note is debt until it converts, so its maturity date and interest give investors a claim if the next round never comes.
A priced round costs more to paper but ends the uncertainty, because everyone knows the price, the share class and the governance.
Outside the US, enforceability comes first: a Delaware-style SAFE may not fit a local LLC, and local equivalents exist for a reason.
The biggest risk is not the instrument but dilution stacking, so model every conversion before you sign the next one.

How each instrument works

The SAFE

A SAFE (simple agreement for future equity) is a contract that gives the investor the right to shares in a future priced round. Y Combinator created it in 2013 and standardized on the post-money version in 2018. It is not debt: no interest, no maturity date and no repayment claim if the company never raises again.

YC's standard forms come in three versions: valuation cap, discount, and an uncapped most-favored-nation (MFN) version. Pro rata rights sit in an optional side letter. Carta's review of pre-seed in 2025 describes the post-money SAFE with a cap and no discount as the standard instrument, with median caps around $10 million for rounds of $250,000 to $1 million and around $15 million for rounds of $1 million to $2.5 million.

The post-money mechanic is what matters. The investor's ownership equals the amount invested divided by the post-money cap. Invest $500,000 at a $5 million post-money cap and you hold 10% at conversion, whatever other SAFEs the company signs later. That later dilution lands on the founders.

The convertible note

A convertible note is a loan that converts into equity at the next qualifying financing, usually at a discount, a cap or both. Until then it accrues interest and runs toward a maturity date. If the company has not raised by maturity, the holder can typically demand repayment, convert on preset terms or agree to extend.

That creditor claim is the point. Carta's own commentary notes that notes persist in capital-heavy sectors and in less mature venture ecosystems, where investors want more protection than a bare contract right. The cost to founders is a liability on the balance sheet and a deadline.

The priced round

A priced round issues shares now at an agreed price per share, usually as a new preferred class. It comes with a full set of documents: an investment agreement, a shareholders' agreement, an updated charter, board composition, protective provisions and information rights.

It costs more and takes longer. In return, everyone knows the valuation, the ownership after closing and the rules for the next round.

Feature	Post-money SAFE	Convertible note	Priced round
Legal nature	Contract for future equity	Debt that converts	Equity issued now
Valuation	Cap, priced later	Cap or discount, priced later	Agreed price per share
Interest and maturity	None	Both	Not applicable
Governance rights	Usually none	Usually none	Board seats, vetoes, information
Speed and legal cost	Fastest, lowest	Fast, low	Slowest, highest
Ownership clarity	Fixed per holder	Unclear until conversion	Clear at closing

When each instrument fits

Three questions decide most cases:

Can the instrument be enforced and registered where the company is incorporated?
Is the round large enough to justify the legal cost of pricing it?
Does any investor need governance rights now rather than at the next round?

The table below maps common situations to the instrument that usually fits. It is a starting point for a conversation with counsel, not a substitute for one.

Your situation	Usual fit	Why
Small round from angels who know the form	Post-money SAFE	Speed and standard terms
Bridge from existing investors between rounds	SAFE or note	Same holders, short horizon
Investors want a claim if no round follows	Convertible note	Maturity and repayment right
A lead wants a board seat and vetoes	Priced round	Governance needs a share class
UK angels relying on SEIS or EIS relief	Advance subscription agreement	Built around HMRC conditions
Local law does not recognize a SAFE	Local equivalent or priced round	Enforceability before speed

What changes outside the US

The SAFE was written for a Delaware corporation with authorized but unissued shares and a board that can issue preferred stock. Many emerging-market startups are limited liability companies with participatory interests, where changing charter capital needs a participants' meeting and a registry filing. A contract promising an unknown number of shares at an unknown price may be hard to register, or may be treated as something else by a local court or tax office.

Local equivalents exist because of this:

United Kingdom: the advance subscription agreement. HMRC's Venture Capital Schemes Manual says it expects the longstop date to be no more than six months from signing, and the agreement must carry no interest, allow no refund and not be capable of variation, cancellation or assignment.
France: the BSA AIR, launched in 2013 as a French adaptation of the SAFE. It is a share warrant issued through an extraordinary general meeting, which places it inside French securities law.
India: foreign investors generally use compulsorily convertible preference shares, which the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 recognize as capital instruments. The Indian "iSAFE" is built on that share class for this reason.
Kazakhstan: the Astana International Financial Centre (AIFC) applies English common law principles. A 2026 Chambers analysis notes that the AIFC Companies Regulations recognize convertible securities, while a SAFE is not separately regulated and must fit the company's articles.

Two more questions travel with every instrument. Currency: a dollar-denominated note owed by a company earning in tenge, som or sum is a currency position, and a dollar conversion price must meet charter capital recorded in local currency. Tax: conversion of debt into equity, accrued interest and withholding can each create a tax event.

Treat both as questions for counsel and a tax adviser in the relevant jurisdiction. In the rounds GETVISION ASIA helps structure, the instrument question usually comes after the holdco question, because the holdco decides which instruments are available.

Dilution stacking: the risk founders do not model

Post-money SAFEs make each investor's stake easy to compute and the founders' stake easy to forget. Every new SAFE adds a fixed slice, and the founders give it up alone.

Take an illustrative case. Founders sign three post-money SAFEs over 18 months: $500,000 at a $5 million cap (10%), $1 million at $8 million (12.5%) and $1.5 million at $12 million (12.5%). Together that is 35% of the company before a seed lead buys anything. If the seed round then sells 20%, founders who started at 100% hold 52%, before any option pool expansion.

Notes and pre-money SAFEs create the opposite problem. Ownership stays unknown until conversion, so the cap table you show investors is an estimate, and the estimate is usually optimistic.

A convertible is a promise about the next round, so write it for the investor who will read it then.

The fix is discipline, not a better form:

Keep a pro forma cap table that converts every instrument at its cap, and update it before each new signature.
Set an internal ceiling for unconverted instruments and stop issuing when you reach it.
Use one version of one form for the whole round so the conversion math is identical.
Read MFN clauses closely, because a later, better term can reprice every earlier holder.
Plan to convert everything in one priced round rather than letting instruments roll forward.

Unconverted instruments are among the most common cap table mistakes that slow diligence.

A four-stage decision process

Stage 1: Confirm the jurisdiction. Establish where the company is incorporated, where investors will hold their stake and which instruments that law recognizes. If a holdco is coming, decide that first.

Stage 2: Model the conversion. Build three scenarios for the next priced round (low, base and high valuation) and show founder ownership in each, including the option pool the next lead will ask for.

Stage 3: Choose and paper. Pick the instrument, start from a recognized standard form, have local counsel adapt it, and keep side letters to a minimum.

Stage 4: Disclose it cleanly. Put every instrument, its key terms and the pro forma table in your data room, so the next investor reads the same numbers you do.

Frequently Asked Questions

At signing, a SAFE is neither: it is a contractual right to future equity with no interest, no maturity and no repayment claim. Accounting and tax treatment can differ by country, so confirm it with an accountant where the company files.

It can when the issuing company is a US corporation or local law recognizes the instrument, which is why many founders sign SAFEs at a foreign holdco level. If the operating company is a local LLC, ask local counsel whether a SAFE is enforceable and registrable, or whether a local equivalent or a priced round is safer.

On Carta's US-heavy platform, median post-money caps in 2025 were around $10 million for rounds of $250,000 to $1 million and around $15 million for rounds of $1 million to $2.5 million. Emerging-market rounds usually price lower because the risk and exit routes differ, so benchmark against regional deals.

Choose a priced round when the amount justifies the legal cost, when a lead investor needs governance rights, or when outstanding convertibles already make founder ownership unclear. A priced round also resets the cap table, which helps when earlier instruments have stacked up.

At maturity the holder can usually demand repayment, convert on the terms the note sets or agree to an extension. Founders should negotiate maturity and conversion-at-maturity terms upfront, because an early-stage company rarely has the cash to repay.