[Funding] (pre)Seed Round instrument - Post Money Cap only SAFE

If you're going to raise capital for your startup, you need to define the instrument. Priced round vs non-priced. SAFE vs Convertible Note. So forth.

There is no right answer but what's the most common (market) financial instrument for (pre)Seed rounds? According to data its...

Post Money, Cap only SAFE

The best data comes from Peter Walker from Carta . (all images below are from Carta)

For pre-seed SAFE beat Convertible Notes by 85% to 15% (# of companies). As seen below.

But more conservative industries still use Convertible Notes in meaningful numbers as seen below.

Even in Seed. SAFEs beat both Priced rounds and Convertible notes. (in 2023 H1)

Within SAFEs, Post-Money SAFEs beat Pre-Money SAFEs by 86% to 13% (by $ amount)

Within Post-Money SAFEs. 'Value Cap only' SAFEs outnumber 'Value Cap + Discount' by 63% to 28%. ($ amount). While Discount only, and MFN only accounting for 6% and 3% respectively.

So, the most common instrument to use for (pre)Seed funding is..

Post Money, Cap only SAFE

Interesting side note, when I raising my first round for my first company in Seattle back in 2019, the common comment I got was "we don't do SAFEs" or "SAFEs are mostly done in the valley". This has changed since then.

So older data points, reflect a higher usage of convertible notes as below.

Over the past two years, about 75% of our start-up clients that have raised money have sold Convertible Notes. 2020. - www.InnovateCapitalLaw.com

According to the Angel Capital Association's 2020 Angel Funders Report, 37% of angel deals were done using convertible notes in 2019 - AngelList

[update 4/11/2024] SAFE vs Convertible note data from Aumni

Data from Aumni (by JP Morgan) shows that Convertible Notes has become more than majority by 3Q 2022, counter to what had been published by Carta.

Based on a comment on linkedIn by Peter Walker (Carta), this could be due to Aumni's data skewing more toward later stages.