Read Electronic Signature Convertible Note Agreement Template For Free

While convertible note is a debt, a SAFE note is not debt: a convertible note includes an interest rate and maturity rate, a SAFE note doesn't. Both SAFEs and convertible notes convert into equity in a future priced equity round; a convertible note may have more complexity to when/if/how it converts.

Convertible notes. Although convertible notes and SAFEs are similar, SAFEs can be a better bet for founders who want to avoid maturity dates and accruing interest.

Investor preference: SAFE notes are increasingly popular, particularly among tech startups. However, some investors prefer to stick with convertible notes or traditional equity financing. Investor risk: SAFE notes lack a maturity date or interest rate, which can frustrate investors waiting to convert them into equity.

Disadvantages. SAFEs do not have an obligation to repay and do not have a maturity date or interest and are therefore much risker for investors than convertible loans ? this may put investors off at the early funding stage.

A convertible note agreement is a legal document that outlines the terms and conditions of a loan that can be converted into equity in the future. Essentially, it's a way for startups to raise money without having to give away equity upfront.

Generally, convertible notes convert into shares (the ?Conversion Shares?) at a qualified equity financing round (this term should be defined in the note and usually means a preferred financing round of a minimum size) at the lower of two different prices per share: (1) the price per share using the conversion cap ( ...

In general, SAFE agreements are considered more founder-friendly because they provide more flexibility and don't carry interest. Convertible notes tend to be more investor-friendly because the maturity date imposes more restrictions on founders.