Fundraising & Investors

SAFE or convertible note or priced round: which instrument should I raise on?

A starting point

For a fast, cheap seed, use a SAFE (post-money, with a cap) if your investors accept it: no interest, no maturity, minimal legal cost. In India the clean SAFE is legally awkward, so most local angel rounds use a CCPS priced round or an iSAFE/convertible variant, budget for real legal work. Avoid classic convertible notes with a maturity date, a note that comes due before your next round becomes a debt problem you do not want.

Go deeper

Hand-picked from around the web, each with a note on why it earns your time.

3 resources 3 link-checked Watch Read

Watch

▶️ Video
✓ Link checked Free Beginner

Why we picked it YC's own CFO walks through exactly how a SAFE, a note, and a priced round each land on your cap table, and she does the cap and discount math live on slides so you can see founder ownership move. This is the canonical source: YC invented the SAFE, so this is the instrument explained by the people who wrote it, not a law firm reselling the idea.

Understanding SAFEs and Priced Equity Rounds

On Y Combinator by Kirsty Nathoo 25 min

  • A SAFE is not debt: no interest, no maturity, so it never comes due as a repayment problem before your next round
  • A valuation cap and a discount are two different levers, and the investor converts on whichever gives them the lower price (more shares, more dilution for you)
  • Model the shadow cap table: SAFEs do not show up as issued shares until they convert, so your real post-Series-A ownership is lower than the number you carry in your head
Open ycombinator.com →

Read

📄 Article
✓ Link checked Free Intermediate

Why we picked it This is the worked dilution example, actual numbers, not a hand-wave: a $100k SAFE with an $8M cap and a 15% discount converting into a round priced at $0.909 per share, showing the discount price ($0.77265) versus the cap price ($0.72727), why the cap wins, and the exact 137,500 shares issued. Change the inputs to your own cap and you can compute your dilution before you sign.

Numerical Example: SAFE, Cap and Discount

From FundersClub by FundersClub 6 min read

  • When a SAFE has both a cap and a discount, only one applies: whichever produces the lower price per share, which means more shares to the investor
  • On an $8M cap into a $0.909 round, the cap price of $0.72727 beats the 15% discount, so the cap is the operative term
  • Once your next round is priced well above the cap, the cap does all the dilution work and the discount becomes irrelevant
Open fundersclub.com →
📄 Article
✓ Link checked India Free Intermediate

Why we picked it A practising senior partner spells out exactly why a raw US SAFE is dangerous for an Indian entity: it can be treated as a 'deposit' and trigger a FEMA or Companies Act violation, a landmine that only detonates when you reach Series A. It then names the compliant substitutes (iSAFE via CCPS or CCD, and the DPIIT convertible note) so you know what to actually ask your lawyer to paper.

Convertible Notes and SAFE Notes in India: The Dilemma

From Bar & Bench by Madhavan Srivatsan 10 min read

  • A US-form SAFE is not recognised in Indian law and can be recharacterised as a 'deposit', exposing the company under FEMA and the Companies Act
  • The compliant SAFE substitute is an iSAFE structured as CCPS/CCD that compulsorily converts on a qualifying round, avoiding any redemption feature
  • The convertible note route is open only to DPIIT-recognised startups, with a 25 lakh minimum per investor and a 10-year conversion or repayment clock
Open barandbench.com →

People also ask

How does seed fundraising actually work, step by step? You build enough proof (traction, team, or a compelling wedge) to make investors believe, then run a tight, time-boxed process where you talk to ma... Beginner 3 resources → How much money should I raise at seed, and how much equity do I give up? Raise enough to hit a meaningful milestone with buffer, typically 18-24 months of runway, and plan to sell roughly 10-20% of the company at seed. D... Intermediate 3 resources → How do I find and get intros to angel investors and seed funds? Warm intros beat cold outreach massively, so map your network and get founders in each investor's portfolio to introduce you. Build a target list r... Intermediate 3 resources → How do I create momentum and FOMO so investors commit instead of stalling? Run the whole process in parallel and time-boxed so investors feel a real deadline and real competition, because a 'maybe' is almost always a polit... Advanced 3 resources → How is raising a seed round in India different from the US? The instruments and paperwork differ: India commonly uses the iSAFE (a CCPS-based cousin of the US SAFE) and CCPS-heavy term sheets to fit Indian c... Intermediate 3 resources → What does an early-stage VC actually look for before writing a cheque? At seed it's mostly team, market, and evidence you can move fast and learn faster, because there's rarely enough traction to lean on numbers alone.... Intermediate 3 resources →