SAFE Notes vs. Convertible Debt

SAFE Notes vs. Convertible Debt

1 min read Many startups use SAFE Notes and Convertible Notes for their early-stage investments.

So what’s the difference?

A Convertible Note is a debt instrument that converts into equity later upon an event such as raising an equity round or reaching a maturity date.

A SAFE Note is a Simple Agreement for Future Equity, a warrant to purchase stock in a future priced round.

The SAFE can convert when you raise any equity investment amount and does not give the entrepreneur control of when.

You can consider Convertible Notes to be legal debt while SAFEs are warrants.

Neither a SAFE or a Convertible Note set the valuation but instead takes the equity round valuation.

Convertible Notes include an interest rate while SAFE’s do not.

Most Convertible Notes have a maturity date while SAFEs do not.

Convertible Notes contain a discount rate that provides additional shares to the investor for investing early. SAFEs have no discount rate.

SAFEs are often considered the more straightforward option than a Convertible Note, but as you can see, the Convertible Note provides more opportunities.

Take our Convertible Notes vs. SAFE Notes Calculator here: https://tencapital.group/note-calculator/


Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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