America Destroys Its Advantage
April 29, 2025
For decades American Universities have been the envy of the World. With the brightest minds and the best facilities, these globally recognized institutions acted as a magnet for talent everywhere.
Today we’re talking about the differences between convertible notes and SAFEs. Although SAFEs are the common standard here in Silicon Valley, I do see plenty of convertible notes if companies are fundraising elsewhere.
Here are the 3 key differences, and why I always suggest using a SAFE, if the company is based in the USA.
The SAFE is a standard template most investors know well, downloadable from the Y-Combinator website. You agree on terms, fill in the blanks and you’re done — no legal costs.
Regardless of what happens with the company, a SAFE means the investor cannot force repayment. This prevents most bad behavior.
Notes must be paid back or converted within 2 years and accrue equity-based interest for the investor. That means the company must either convert the note via a priced round, pay back the loan, or extend the note. I’ve seen note renegotiations become a big distraction and SAFEs avoid this problem.
Best of luck out there.
