SAFEs and Convertible Notes
The chicken-and-egg problem of early fundraising is valuation: pricing a company with no revenue and no track record is nearly impossible, and haggling over an arbitrary number wastes time both sides would rather spend building. SAFEs and convertible notes are the elegant workaround — instruments that let a company raise money now and postpone the valuation question until later, when there's more to go on. They're how most early-stage rounds actually happen, and understanding their two key knobs (the cap and the discount) is essential for any founder or early employee.
The chicken-and-egg problem of early fundraising is valuation: pricing a company with no revenue is nearly impossible. SAFEs and convertible notes are the elegant workaround — instruments that let a company raise now and postpone the valuation question until later. Understanding their two key knobs, the cap and the discount, is essential.