Are SAFE Notes Safe?
- Bonny Morlak
- Mar 25
- 2 min read
Updated: Mar 28
What Every Founder Must Know Before Raising Money in 2025
You ever notice how startups raise money like it’s Monopoly cash?
Founders tossing around numbers, signing term sheets they barely understand, and handing out equity like it’s a free sample at Costco.
But are SAFE notes safe? That’s the real question.
In my latest YouTube video, I unpack the realities of SAFE notes, why they’re popular, how they actually work, and what most founders totally miss. But if you’re more of a reader, I’ve laid it all out below.
What Is a SAFE Note?
SAFE stands for Simple Agreement for Future Equity.
It’s not a loan. It’s not equity. It’s a bridge between now and when your startup is actually worth something on paper.
SAFE notes were designed to make early-stage fundraising simple:
No interest
No maturity date
No immediate valuation debates
Sounds great... until it starts hurting your next raise.
Are SAFE Notes Safe When There’s a Cap?
The most common issue: valuation caps. Here’s a quick example: You raise $250K with a SAFE note at a $5 million cap. One year later, you close your Series A at $20 million. Your early investor gets 4x more shares than your Series A investor, because they convert at the cap, not your new valuation.
It’s a reward for early risk, sure. But it also:
Sets an unofficial valuation for your company
Can trigger pushback in future rounds
Can damage credibility if future rounds are priced lower
That’s why many founders find themselves trapped—without even realizing it.
The Better Way: Uncapped SAFE with a Discount
Instead of setting a hard cap, offer early investors a 20% discount on your next priced round.
✅ No valuation anchoring
✅ Keeps your flexibility
✅ Still offers a fair deal to early believers
Discounts encourage commitment, without limiting your future upside.
(5 minutes, no fluff—just clear strategy.)
Alt Text (Video Thumbnail): Bonny Morlak explaining SAFE note terms with text overlay: “Are SAFE Notes Safe?”
If You Have to Use a Cap…
Sometimes investors demand it. If you must go there:
Negotiate a fair cap (don’t sell yourself short)
Tie it to real milestones, show that you’ve earned it
Know your leverage: You’re not desperate. You’re building something meaningful.
📌 And please, consult a startup-savvy lawyer before you sign.
Final Take: Are SAFE Notes Safe for Founders?
SAFE notes are not good or bad, they’re tools. Used well, they help you raise fast without unnecessary friction. Used wrong, they can quietly wreck your cap table and sabotage future growth.
So, are SAFE notes safe? Only if you understand what you’re agreeing to.
What’s Next?
📥 Download My Startup Fundraising Guide – A step-by-step playbook for raising capital the right way.
📬 Join My Weekly Newsletter! Get founder insights, funding strategies, and exclusive resources straight to your inbox.
Want more insights on building a thriving startup without burnout?
💬 Got Thoughts?
Have you used a SAFE note before? What worked, or didn’t? Share below 👇 and let’s help other founders raise smarter in 2025.
Comments