SAFE and Convertible Note at a glance
| Point | SAFE | Convertible Note |
|---|---|---|
| Instrument | Contract for future equity upon defined events. | Debt instrument that may convert into equity. |
| Interest and maturity | Typically no interest or maturity date under common forms. | Typically states interest and a maturity date. |
| Conversion economics | Often uses a valuation cap, discount, or most-favored-nation term. | May use a cap or discount and also addresses accrued interest. |
| Repayment pressure | Not ordinarily a repayment obligation like debt, subject to the exact form. | Maturity can create repayment, extension, or negotiation pressure. |
| Check | Company-capitalization definition, conversion, liquidity, dissolution, and side letters. | Principal, interest, maturity, conversion, security, subordination, and amendments. |
Documents to put side by side
- The current draft or signed document for each option.
- Definitions, schedules, amendments, approvals, notices, and incorporated policies.
- A written business objective, timeline, cost model, and risk list.
- The primary source or professional advice that applies to the jurisdiction and facts.
Sources to verify
Use primary or authoritative sources to confirm current forms, filing instructions, agency rules, and legal definitions before acting on a general guide.
When professional help is useful
Use qualified advice before relying on a comparison for enforceability, tax treatment, worker status, privacy transfers, securities, regulated disclosures, litigation strategy, or a material transaction.
Before sharing records
- Keep originals in a controlled file and review a clearly dated working copy.
- Redact sensitive data unless the recipient is authorized and needs it.
- Label each document with its date, parties, version, jurisdiction, and status.
- Ask one focused question and identify the desired business outcome.