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Valuation caps, discounts, MFN clauses, pro rata rights and pre-money versus post-money. Each is one line in the document and each one changes how much of your company you just sold.
The move from pre-money to post-money SAFEs looks like a technicality. It is not. It decides who absorbs the dilution when you raise again on another SAFE before your priced round.
Your early investors share dilution with you when later SAFEs are issued. Their final ownership is not fixed at signing, and neither is yours.
Your investor's percentage is locked in at signing. Every subsequent SAFE dilutes you and the other common holders, not them. This is now the standard form, and founders regularly stack several without modelling the total.
If you have issued three or four post-money SAFEs at different caps, work out your combined ownership at conversion before you sign the next one. Founders are routinely surprised by that number.
The maximum valuation at which the investor's money converts. Set it too low and a strong priced round hands your early investors a much larger slice than either of you intended.
A percentage off the price your priced round investors pay. Where there is both a cap and a discount, the investor gets whichever is better for them, not an average.
If you later give anyone better terms, this investor gets them too. Harmless when you keep good records, awkward when you have forgotten what you signed nine months ago.
The right to keep their percentage in future rounds. Reasonable for a meaningful cheque. Given to every small angel, it can crowd out the lead you actually want at Series A.
Can I just use the standard Y Combinator template?
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Yes, and for a clean angel cheque on standard terms that is often the right answer. What you still need is someone to check the numbers you put into it, confirm you have the corporate authority to issue it, and make sure the securities filings actually get made.
Do I need to file anything with regulators?
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Usually yes. A federal filing and state notices generally follow a SAFE round. Missed filings are cheap to fix early and irritating to explain in diligence later.
What does issuance cost?
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From $2,400 for a SAFE or convertible note round, including the documents and the filings. Fixed fee, quoted before we start.
An advisor wants to invest and advise. Is that one document or two?
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Two. The investment is a SAFE, the advisory relationship is an advisor agreement with its own vesting. Mixing them into one arrangement causes problems the first time either side wants out.
Can you tell me how diluted I will be?
Yes, and we would rather do that before you sign than after. Send us the SAFEs you have already issued and the terms of the one in front of you.
Send us the SAFE on your desk and anything you have already issued. You get a plain answer on the terms and your ownership at conversion.
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